Your childhood best friend calls you with bad news: he has cancer. In your youth, you thought you were invincible, but this myth just crumbled away. The illness reminds you that mortality is real.
You’ve been planning a big vacation in a historically dangerous country for months, booking places to stay and outlining the best and safest routes. Despite your best efforts, a tragic accident steals you away sooner than you had ever thought.
If you haven’t taken the time to plan for a future without yourself in it because you’re too busy or think you’re “too young”, consider beginning to take steps towards this goal. The world is an uncertain place, but your financial plans don’t have to be. Don’t wait until it is too late! Start planning for the future of your loved ones.
These are a few of the most common reasons to reach out to me and update your retirement or transfer-on-death (TOD) form.
- I’ve been procrastinating on creating a trust and the task is lingering on my to-do list. In the meantime, at least add a TOD designation on your account so that your investment funds are not probatable1.
- I put my trust as beneficiary to everything. Retirement accounts are usually more cost effective with a designated or “named” beneficiary. Most times the spouse as primary beneficiary and the trust as contingent is a better way to go. Non-financial reasons are usually the cause for a trust beneficiary: incompetence, immaturity, or lack of mental capacity.
- My marital status just changed. Don’t disinherit a new partner by forgetting to update your beneficiary designations.
- Name a contingent beneficiary. If a primary beneficiary pre-deceases you, you have effectively committed the most common mistake – not naming a beneficiary. Keep your beneficiary forms current!
- I accelerated the inheritance to a loved-one. For example, one child receives home purchase or college assistance that another beneficiary does not receive. Oftentimes, we want to reconcile the difference when we cross over the rainbow.
- What’s per stirpes and pro rata? In the case of multiple beneficiaries in which any of them predecease the owner of an account, these options determine the allocation of the assets. Per stirpes ensures that the estate of the deceased still receives the portion intended for them, whereas pro rata redistributes the assets to exclude their estate, increasing the portions of the remaining beneficiaries.
- “I’ll never spend these retirement funds.” Consider choosing a beneficiary in a generation that would best benefit from the gift. If you have done a great job saving, odds are that you want to be strategic about choosing a beneficiary.
- Share the good news… once you have updated your beneficiary forms. Make sure your beneficiaries know where to find your beneficiary forms. Don’t let an account get lost in the shuffle.
1"Problems with Probate" Video
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC. Financial planning offered through Pharaoh Financial Group, Inc., a registered investment advisor and separate entity from LPL Financial. The views and opinions expressed by this blog post are as of the date of the publishing, are for general information only and are not intended to provide specific advice or recommendations for any individual. It is our intention to provide advice tailored to individual circumstances. Please contact your financial advisor and/or tax professional when making estate-planning decisions. Neither LPL Financial nor Pharaoh Financial Group, Inc. can be held responsible for any direct or incidental loss incurred by applying any of the information offered.