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Avoiding a common estate planning mistake

Many New Jersey residents consult someone knowledgeable in estate planning to draft even a basic estate plan consisting of a will, powers of attorney for health and finances and trusts. However, fewer people consult anyone when they fill out beneficiary designations for accounts such as insurance policies, bank accounts or retirement accounts. These forms are just as important -- and in some cases even more important -- in estate planning as any other document.

This is because those beneficiary designations will trump any bequest in a will nearly every time. Many people fail to view these forms periodically. If they are not reviewed periodically to be sure they are still in line with an individual's wishes, the proceeds of the account will go to whomever is listed on the form -- which, in some cases, could be an ex-wife or other individual with whom there is no current relationship.

Another complication can arise when the form is not filled out properly. For example, one man's wife of only two months inherited his $400,000 IRA because the beneficiary designation was incorrectly filled out. He said on the form that he wanted the proceeds distributed in accordance with his will. What he should have done was specify individuals who were to receive proceeds of the account.

Estate planning is not over once all of the forms and documents are signed. It is a process that changes right along with a New Jersey resident's life. Periodically reading those documents, including beneficiary designations, could avoid an heir or heirs losing their inheritance due to a clerical error or oversight.

Source: finance.yahoo.com, "Man's mistake cost his children $400,000 of an IRA inheritance", Jeanie Ahn, June 27, 2014

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Law Offices of Nancy M. Rice
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