Naming beneficiaries isn’t as easy as it sounds, p3

1/20/2015 | Kaplin Stewart Blog

The weather in the Philadelphia area has not been as bad as last year, but we are still having a tough winter. Icy roads, multi-vehicle pileups, and a general sense of gloom this past weekend had many of us curled up at home with a book or a good movie. Not that there’s anything wrong with that, but wouldn’t those hours have been the perfect time to review and to update your beneficiary forms?

For people with small children — or a dog, for that matter — winter weather probably means cooped up rather than curled up. If you were thinking about beneficiary forms while trying to entertain the little ones, perhaps you had an epiphany; perhaps you realized that, if you passed away while your children were still young, they would have a little trouble managing their inheritance.

And that brings us to another mistake people make when designating a beneficiary.

Mistake #3: Not naming a guardian for young children. This is an easy mistake to make, but, again, the consequences may go exactly counter to your intention.

Say you name your children as beneficiaries, but you die before they turn 18. If you have not appointed a guardian, the court will appoint one for you. Remember, there is no default, go-to relative in these cases. The court considers all the facts and makes a decision that could be the last thing you wanted. Naming a guardian can, as one financial planner told us, keep the money out of your drug-addicted, money-grubbing, generally loathsome ex-spouse.

There is a way to avoid making these mistakes, of course: Work with an experienced estate planning professional. That person may see pitfalls that you haven’t thought of that would undo everything you thought you had done for your beneficiaries.

Source: Bankrate.com, “5 IRA beneficiary form mistakes to avoid,” Shelly K. Schwartz, accessed Nov. 20, 2014