Yikes! Who did I list as Beneficiary?

Often when an Elder Law attorney meets with a client it includes discussing how the client may want their bank accounts, brokerage accounts, and other assets distributed at death. Many clients are surprised to hear beneficiary designations trump what they have listed in their Last Will and Testament. For example: Sadie Smith owns two checking accounts and an Ameriprise Brokerage account, each account is titled the same, Sadie Smith, POD (payable on death) to John Smith, her son. Sadie’s Last Will states she wants her assets divided equally between all three of her children. Sadie is surprised when she learns that John will receive the money in each of her accounts as the named beneficiary and her other two children will not receive any of the money. Of course, Sadie immediately states, “I don’t have to worry, John will make sure his sister and brother are taken care of.”

In this case, John may be a great guy, collect the $300,000 and give each of his siblings $100,000 making sure Mom’s wishes come true. John will need to file a gift tax return since the money became his at Mom’s death and he is now giving it to his siblings. And if this family is lucky, John will not be in the middle of a divorce or be involved in a law suit from his most recent car accident. Worse yet, hopefully John does not have a list of outstanding creditors and is not in the middle of a bankruptcy process. All issues that could make this simple process of making Mom’s wishes come true very expensive.

Many client’s use beneficiary designations to avoid legal fees, i.e., probate fees or trust administration fees, at their death. Probate and trust administration rules provide a legal method of ensuring your money and assets go the person you want to receive them. The rules and guidelines provide instruction of how the process works just in case there are complications such as creditors, a predeceased beneficiary, a new grandchild, or divorce.

The New Year provides you the opportunity to evaluate each of your assets and ensure your beneficiary designations as well as your Last Will and/or Trust states exactly how you want your money and other assets to be distributed at your death. You do not want to be the story heard around town where the kids spent more money on attorney fee’s arguing over Mom’s estate than Mom’s estate was worth.