Beneficiaries
It seems so simple: name the beneficiary and be done. You never need to think about it again. Interestingly, one of the hardest things we do in our practice is helping clients manage beneficiaries.
I suppose one of the problems is that you think you’re never going to die soon. But when you die, it is too late!
An interesting fact to consider is that beneficiaries trump your will or trust. Many people think it controls everything if they do a will or trust. But it doesn’t! The ownership of assets, designated beneficiaries, and various legal documents can complicate or even render the instructions outlined in your will or trust useless. Regardless of what your legal documents state, if you have a beneficiary listed on an account—such as an ex-spouse or someone with whom you may have a complicated relationship—the company must pay that beneficiary, regardless of your wishes.
I have had clients with special needs children whom they loved dearly. After passing, these clients believed their children would be cared for through their assets. However, when they died, another beneficiary—someone who didn’t care about the special needs child—was named in their will. As a result, the child received nothing and was left unprotected. Whose fault is that?
I’m not sure there is fault, but I know that I seldom find correct beneficiaries. When you do an estate planning audit, you must look at the first and second beneficiaries, how assets are owned, what documents say, and ensure you understand what a client wants. Only once in the thousands of reviews I have completed have the beneficiaries functioned as planned. Why does this happen? Because you do things at different times. You do things when you are young, with your partners, when you are married, and when you are divorced, but you don’t do it all once. Because you are not going to die, and it is too much trouble. It is so hard for me to get clients to check their group insurance and get confirmation of what their beneficiaries are.
I’ve had multiple women walk into my office who said they were beneficiaries, the spouses of someone who just died. When we checked, the beneficiary was someone else. It is critical to do this right.
Doing a beneficiary audit for a client is the hardest thing to do. Because you can always do it tomorrow, but tomorrow never comes. You are not going to die, but you do! Have you done a beneficiary audit on:
- Every life insurance policy you have, including group insurance
- Annuities
- Roth IRAs
- Regular IRAs
- 401(k)s
- Pension Plans
- Group Benefits
- Trusts
- Payable on Death (POD) Accounts
I seriously doubt it! It amazes me how many of my clients haven’t; I’m not sure they refuse, but they don’t see the priority and have not done their beneficiary audit. They have not helped us help them do their beneficiary audit. I am embarrassed when I go to a funeral of a client who has died, and their estate plan is not appropriate. So many of my clients don’t think it’s essential today. But I guarantee you it’s important at your funeral. You’re one car accident from a disaster, but you don’t have time to make it right.
Some of it is that you don’t understand how important it is. You don’t understand how important it is to those you love, care about, or want to take care of if something happens to you. Often, your second beneficiary is more important than your first! Very seldom have you thought about it.
I know you think this letter is not about you, but it is! In the thousands of reviews I’ve done, I’ve only found one in which the beneficiaries were correct. Who do you love that you won’t take care of because you didn’t take the time to do it?
Sincerely,
WAYNE VON BORSTEL, CFP®, CKA®, MSFS, ChFC®, CLU®
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.
