Published by Beth Schanou, Director of Wealth and Estate Planning
When you hear “estate planning,” what comes to mind? Some of the things that come to mind for many are the need to work with an estate planning attorney and having long, hard to read documents drafted. That is part of it. The estate planning process should be undertaken with an estate planning attorney, and usually the documents are difficult to read for the average person. However, it’s important to know the entire planning process is not complete just by executing the documents. There are other critical pieces, one of which is designating beneficiaries.
Like many of you, we are learning about group benefit changes for 2017. The end of the calendar year usually requires a review of benefit options and is a good time to double-check beneficiary designations as well in case you experienced any of the life events listed in the blog titled “Reviewing and Updating Your Estate Plan“. Beneficiary designations which are inconsistent with your estate plan may result in unintended consequences. The wrong person may inherit the asset, or a designated beneficiary may be unable to inherit the asset without court proceedings due to the beneficiary’s age.
Of particular concern here is naming minors as beneficiaries, whether primary or contingent. Parents of young children are the most likely offenders, especially if they have not engaged the services of an estate planning attorney. However, minors are legally incapable of filing a valid claim for a death benefit and parents do not necessarily have the legal right to claim a death benefit on behalf of a minor child without court approval. This extra requirement and burden is not a desired outcome and usually requires an annual report to the court and the associated expenses of working with legal counsel.
Complication as described above can be avoided. Other potential beneficiary options include naming a child’s trust or an adult as custodian for the minor child. The estate planning attorney’s ultimate recommendation will depend on the value of the estate, the types of assets and your goals for wealth transfer.
If you would like assistance in taking steps to create or update your estate plan, contact your Advisor or a member of the Wealth Enhancement Group.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.