By Christian Cordoba, CFP
From incapacity planning to legacy and gifting intentions, a well-constructed estate plan can be one of the greatest gifts you provide your loved ones to remove unnecessary stress during an emotional time of loss—but only if it is properly executed. Be sure to check your estate plan for these critical financial planning updates.
The administrative and claiming side of estate planning which occurs after you’re gone requires critical attention to detail and ongoing review to ensure your intentions and assets maintain alignment. Following are some of the biggest and most common mistakes to avoid.
Not retitling assets in the name of the trust
One key function a trust provides is the ability for assets to bypass the high expense, lengthy time and public exposure of the probate process. However, if assets are not retitled into the name of the trust, they will not be protected under its provisions. Even if the assets are specified within the trust, they must be titled properly for the trust to take effect.
Not creating a strategic plan for retirement accounts
A caveat to the previous rule, retirement accounts are inherently structured for individuals, so retitling to change ownership can quickly trigger significant and irreversible taxable events. Similarly, naming a trust as the beneficiary to inherit retirement accounts can also carry unique limitations and tax considerations. To help preserve the tax benefits of these retirement assets for future generations, be sure to discuss these assets with a professional trained in the advanced tax laws and strategies surrounding the complexities of retirement accounts.
Not updating designated beneficiary forms
Designated beneficiary forms on all financial accounts are king and trump all other estate planning documents. Be sure to regularly review these forms and keep them up-to-date with your intended, chosen beneficiaries.
Not communicating with your beneficiaries
Having a proactive conversation with your heirs about your intentions can help alleviate potential family conflict caused by speculation about your wishes. It can also provide the proper guidance for your heirs to maximize their inherited assets. When and how they receive their funds or how they retitle assets can result in costly taxes, fees or penalties. Surviving spouses, in particular, will have important decisions surrounding retirement accounts as to whether they should be titled as inherited accounts or rolled over into their own name—both options carrying different implications for taxes and regulation.
Your heirs will benefit from the special attention you give to these aspects of your estate plan in your planning process.
Christian Cordoba, RFC®, CFS, is a CERTIFIED FINANCIAL PLANNERTM, Master Elite IRA Advisor and founder of California Retirement Advisors located in El Segundo. He is a member of Torrance Memorial’s Professional Advisory Council. www.CRAretire.com. (310) 643-7472.
Investment advisory services provided by California Retirement Advisors Group, Inc. and First Allied Advisory Services, Inc., both registered investment advisers. Registered representatives and financial consultants offering securities through First Allied Securities, Inc., a registered broker/dealer, member FINRA/SIPC. California Retirement Advisors Group is not affiliated with First Allied Securities Inc. and First Allied Advisory Services, Inc. CA Insurance license #0B09076.