The Devil’s in the Details

One “hell” of a story about estate planning

“The devil’s in the details.” We’ve all heard this saying, and never is it more true than with beneficiary designations. As a CPA and CERTIFIED FINANCIAL PLANNER™ professional, I have seen expensive and carefully-crafted estate plans fail due to improper implementation—especially with regard to beneficiary designations.

Picture this: A retired couple, Dick and Jane, visit their attorney to discuss an estate plan. It’s something they’ve neglected to do for a long time but are finally making it a priority in their lives. After the initial visit, they have some homework to do and they spend weeks talking about and formalizing their wishes for the distribution of their assets at their deaths:

• They make decisions together about how old their children and grandchildren should be when they have access to their inheritances.
• They consider issues such as divorce and creditor protection for their heirs.
• All this, understandably, is a lot of work.

Finally, all the decisions are made and they meet with their attorney one last time to receive their trust and other estate-planning documents.

The attorney presents them with a handsome, leather-bound binder that contains signed copies of everything, along with some instructions. Jane writes him a check for his services and she and Dick head home, feeling very good about their planning.

Arriving home, they put the binder in their fireproof safe, knowing it will be secure and that their children will be able to locate it when the time comes. Dick makes a mental note to change the name on their investment accounts to match that of the newly-created trust.

Now here’s where those devilish details come into play. Unfortunately for Dick and Jane, what they don’t realize is that their estate plan is far from complete.
Even if Dick does remember to change the name on their investment accounts, they’ve overlooked the importance of updating their beneficiary designations for any 401(k), other qualified plan accounts, and IRAs.

By missing this critical step, these assets may not transfer at death to the people they intended. In the worst-case scenario, there is no beneficiary listed and the state must decide who should inherit the asset. This involves tremendous expense, and the assets may be tied up for months.

Creating the estate plan was a great start to putting Dick and Jane’s financial house in order to avoid probate, but for it to be successful,
all of the implementation instructions must be carried out completely.

Here’s the takeaway: If you don’t have an estate plan in place, or aren’t sure whether or not it has been fully implemented, you should talk to an attorney or financial advisor right away. Don’t let the devil in the details get the best of you.