Q. I’m 80 and I have about $2.5 million in my estate. About 85 percent is in brokerage accounts. I’ve set my two kids as beneficiaries with per stirpes on all accounts. I’m told this bypasses probate. My will basically does the same thing. Is there any downside?
A. We’re so glad you’re asking. While we hope you have many happy and healthy years ahead of you, once you’re gone, it will be too late to make any changes.
Because yes, your current plan could have complications.
Even though you have beneficiary designations on your investment accounts, having a will is important.
This is because individuals have assets that do not pass by beneficiary designation, most commonly personal assets such as jewelry, household goods, cars, or refunds received at the time of death. These will pass by the laws of intestacy if there is no will to direct how they should pass, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.
She said a beneficiary designation, such as “payable on death” designation, will supersede your will provisions with respect to the specific account.
“Naming both of your children on all of your accounts is preferable to naming one on one account and another on another account because you may spend down the accounts at different times and in different amounts thus ultimately benefiting the beneficiaries unequally,” she said.
Romania said it’s important to speak to your estate planning attorney about whether you should designate beneficiaries on your financial accounts or life insurance policies, or instead, have the assets payable to the estate or trusts under your will.
Depending on the overall estate plan, she said, naming beneficiaries could disrupt and undermine the plan your attorney prepared. That’s because trusts established in your will may not be able to be funded and taxes or administration expenses may not be able to be paid as planned.
“Many times bank officers will encourage patrons to name beneficiaries on various accounts because of the Federal Deposit Insurance Corporation insurance limitations, but moving some of your money to another bank may be a better idea,” she said.
Another problem with beneficiary designations is that as financial institutions merge or are acquired by others and the accounts are changed, or as you may move your accounts from one financial institution to another, the beneficiary designations that you once had in place may be inadvertently lost, she said.
“Therefore if you are relying on beneficiary designations, after any change in your financial institution, whether a branch change, name change or institution change, you should reconfirm your beneficiary designation,” she said. “This is particularly true for insurance policies and retirement accounts which generally pass by beneficiary designation forms and not by your will.”
It’s worth meeting with an estate planning attorney to be sure your current plan still matches your goal for your assets and heirs.
Email your questions to moc.p1540235345leHye1540235345noMJN1540235345@ksA1540235345.