It’s late, do you know who your beneficiaries are?

It’s late, do you know who your beneficiaries are?

By ROBERT S. COLLINS/ BHP Custom Publishing

When is your number up? Will you be ready when your name is called? I’m not talking about buying a lotto ticket or standing in line for your car tags, I’m asking about the day when you pass on to the next life, leaving our cherished and loved ones behind.

Make sure you leave your loved ones feeling loved

When is your number up? Will you be ready when your name is called? I’m not talking about buying a lotto ticket or standing in line for your car tags, I’m asking about the day when you pass on to the next life, leaving our cherished and loved ones behind. Yes, those loved ones, young and old, who depend on us to make sure we have our bases covered so they will be able to carry on without us. Most of us have no idea when our day will be, but we need to plan as if we do. 

When it comes to covering bases there are many, many things we need to cross off our list as being reviewed, assessed and updated. There are things like your last will and testament, trusts for minors, trusts for special needs children or adults, carefully picking guardians for minors and picking executors and trustees of your estate. While all of these are critical for successful planning, they are not where the largest mistakes are usually made. Care to guess where the largest margin of error occurs when people plan their estate? Anyone? To the surprise of many, the largest errors in estate planning come from beneficiary arrangements. You know, the name you listed on your 401-k, your IRA, your pension, your life insurance policy or even your annuity or maybe even that “Transfer on Death” arrangement on an investment account.

Many people write this name down when they are filling out documents at work or meeting with an attorney, never to review it again. The problem is, things change. People get divorced, a spouse passes away, relationships in families change like an estranged child. There are many stories of famous people who had planning snafus. Let me share some stories of both failure and success in planning to emphasize the point of how important it is to plan ahead. 

One of my good friends growing up had parents that eventually divorced. The father very much loved his three kids and told them many times he looked forward to leaving them better off when he left this earth. He went on to make millions in stock options in the corporate world. He eventually fell in love again and remarried. Unfortunately, he died at the early age of 58 of a heart attack. Eventually his kids came to learn that their father had never filled out a simple last will and testament. He surely meant to leave his new wife assets to take care of her for the rest of her life, but he did not mean to disinherit all three of his kids in the process. The problem is, he did. I know he wanted to leave a legacy for the next generation, but I don’t think this was the legacy he had in mind. Is that how you would want to be remembered by your children? I didn’t think so.

Fortunately, not all stories end in the way the last one did. Years ago, I met a pilot at a dinner I hosted for pilots in Memphis in 2007. He was married with two kids and wanted to meet for a full financial review. We met and reviewed his investment accounts, his insurance, his employer-sponsored benefits and his estate plan. Everything needed work. He was under-insured, had no will, and many of his beneficiary arrangements needed updating. It took several months, but by March, we finally had all beneficiaries updated, we increased the amount of insurance he had through his employer and had him meet with an estate planning attorney and execute the documents to put his estate plan in place. Three months later he was dead of a heart attack at age 51. His death was an unexpected tragedy. Who checks out at age 51, at the peak of their career and family life? Well apparently my client did, and no one was prepared for it. Except him and us. Thankfully, just three months earlier we had the foresight to understand that things don’t always go as planned, and that is why you plan for the unexpected.

One final story that I read about in a financial periodical. Years ago, a man began working for the city he grew up in and shortly after married his high school sweetheart. He was approaching retirement from that same job some 40 years later, but died literally months before his retirement. His spouse would be OK though, because she would get his guaranteed lifetime pension income from the city to take care of her every month for the rest of her life — except she didn’t. When the man started the job, he was single, so he named his sister as beneficiary. In over 40 years, he never met with an advisor and reviewed all of his beneficiary arrangements. Therefore his sister got the lifetime income and his loving wife and high school sweetheart, who even fought it in court, got nothing. 

When things change, your planning must change with it. My advice is to always remember this little cliche in life: failing to plan is planning to fail. Don’t forget to check your beneficiary arrangements on any account that has one:  401-k’s, pensions, IRA’s, life insurance policies, annuities, investment accounts with a named beneficiary, and many other items. Also, don’t forget to update beneficiaries in your last will and testament and revocable living trusts. You are given the chance each and every day you wake up to make sure your story is the successful one and not the nightmare. So I ask, do you know who your beneficiaries are?

Informational Disclaimer

Robert S. Collins III, CFP® is a practicing Certified Financial Planner®, LPL Registered Principal and Managing Partner of Wealth Management Group of Tennessee, Inc. which is located at 751 Cool Springs Boulevard, Suite 100, Franklin, TN 37067, in Cool Springs. For more information, call (615)778-1790, or email Securities and insurance offered through LPL Financial, Member FINRA/SIPC, a Registered Investment Advisor.

About The Author

Kelly Gilfillan is the owner-publisher of Home Page Media Group which has been publishing hyperlocal news since 2009.

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