WISCONSIN GOLFER l JANUARY/FEBRUARY 2012
www.wsga.org 22
Dos and don’ts of beneficiary designations
Don’t forget Uncle Joe
ho are the named beneficiaries
for your retirement accounts?
How about your life insurance? When was
the last time you checked to make sure
that those designations still reflect your
wishes and fit into your overall estate plan?
Following are some dos and don’ts that
illustrate how important beneficiaries can
be in your overall estate plan.
W
DON'T: Name your estate as beneficiary
If you don’t name specific beneficiaries
for your life insurance and retirement ac-
counts, or if you name your estate as ben-
eficiary, chances are those assets will end
up in probate court. There are many rea-
sons you don’t want this to happen. Like
most courts, probate court is slow, so your
heirs will have to wait to receive the asset.
Plus, there will be legal fees to pay. Also, if
these assets go to your estate, they can
be claimed by your creditors or your heirs’
creditors, leaving less for those who you
really want to have it. Taxes may even
wipe out the benefits of some tax-favored
retirement accounts. Only naming individuals or trusts as your beneficiaries avoids
most of these complications.
DON'T: Name minors as beneficiaries
You want your children to be taken care
of when you are gone. But in some states,
minors can only inherit limited amounts
after they turn either 18 or 21. If you
designate a minor, a court will appoint a
guardian to manage the funds until the
child reaches the right age. If you expect to
have heirs who are minors (young grand-
children, for example), set up trusts to han-
dle their money and designate when they
get access to all or part of the assets in the
trust. Then name the trust your beneficiary.
You keep control now and when you’re
gone, and the assets are protected from
creditors while the beneficiaries are minors.
DON'T: Assume your will overrides your
beneficiary designations
Except in the case of your spouse, your
beneficiary designations on retirement ac-
counts and insurance always override your
will. If you want someone besides your
spouse to inherit retirement account or insurance assets, he or she has to sign a
written spousal waiver under the ERISA
laws. Without the waiver, your non-spouse
beneficiary designation will be deemed invalid at your death.
DO: Specify percentages, not dollars
Say you have a retirement account
worth $100,000, and you designate
$80,000 of that amount for your nephew,
with the remainder to his brothers and sis-
ters. What if the account value drops and
is only worth $80,000 at your death? The
nephew would inherit all of the money
and his siblings would get nothing. A bet-
ter way to make sure no one is left out is
to use percentages. For example, you
might specify 50 percent for each of two
siblings, or 33.4 percent for one and 33.3
percent each for two others. If you wish to
favor one individual over another, make it
a percentage, such as 65 percent to your
sister, 25 percent for your brother and 10
percent for your uncle Joe.
DO: Name secondary beneficiaries
If your primary beneficiary has died or is
otherwise ineligible, and you haven’t named
a new one, the assets would go to your
secondary beneficiaries. Without designating
a secondary beneficiary, the assets go to
your estate.
DO: Consider naming a revocable trust
Consider a revocable trust for any ac-
count except an IRA. Typically, you will
want to name a spouse or child as the
beneficiary of an IRA, so that person can
take advantage of the “stretch” rules to
defer taxes over their lifetime. Even if they
are beneficiaries of the revocable trust,
they may lose those tax benefits if the
trust rather than the person is named. ;;
______________________________________
Chris Moss is a lead financial advisor with
Clifton Gunderson Wealth Advisors in Wisconsin.
He can be reached at Chris.Moss@clifton-
wealthadvisors.com or (920) 232-2202.
