Since most families are sheltering at home, this “spare time” represents an excellent opportunity to catch up on small and important financial matters: the type of tasks that are easy to neglect because we don’t have the time. This opportunity is interesting enough to catch the attention of our local CBS Station KPIX TV in San Francisco.

Please call us with any questions you may have on this or any other financial planning matters. We invite you to forward this message to friends, family, and colleagues who have expressed concerns about today’s economic and investing environment, and might want to talk about their questions. After all, there is no need for people you care about to walk through times like this alone.

For many people, finding time to keep on top of financial matters is challenging. But given many Americans have additional time these next few weeks as the country works through Covid-19, this could be an excellent time to make progress on critical but simple financial matters.

Cornerstone will share during this time ideas to help you make progress on these matters, starting today with updating Beneficiary Designations. Please pass along to anyone you feel may be interested in this topic.

Assets pass to beneficiaries, including spouses, in different forms. The most common tools used to distribute assets are trusts, wills, and a document commonly referred to as Beneficiary Designation. Beneficiary Designation assets are not transferred to loved ones by trusts or wills. Instead, these assets go directly to the beneficiaries named. For this reason, this is an essential tool that requires attention.

Here’s a list of assets that are distributed via beneficiary designation:

  • 401k, 403b and 457 accounts
  • IRA and Roth IRA accounts
  • Defined Benefit accounts
  • Life Insurance policies
  • Annuities
  • Payable on Death (POD) bank accounts
  • Transfer on Death (TOD) investment accounts
  • Property that has joint tenancy with rights of survivorship

Most everyone saving for future needs owns at least one of these assets. The problem is, these assets are occasionally left unattended if there is a change in an investor’s life (death of a significant other, divorce, marriage, change in family and relationships, and so on). Unfortunately, we hear stories about loved ones who were devastated personally and financially due to an outdated beneficiary designation form.

If you have questions on how this all works, would like a thinking partner, or would like assistance on how to update your accounts, please contact Cornerstone for help. Reviewing beneficiary designation is part of our client planning process. We are happy to extend a complimentary review to you as a way to help you make the most of this time. And as an opportunity to learn more about how we can help in other areas.

This offer to review beneficiary designations is extended to your friends, family, and colleagues. While some people may have an investment or financial advisor, most don’t work with a Certified Financial Planner™. We are happy to fill in this gap if we can and help them with other questions they may have about their personal finances.

Right now, as we deal with Covid-19, we are walking through history. There is no need for you or your family and friends to walk through this alone.

By Rich Arzaga, CFP®

A conversation with mom and dad about personal and financial matters is not easy for many families. But as parents get older, especially those in their 70s and 80s, we found with our clients that many parents appreciate the assistance of adult children. If this might be the case for you, the next question becomes, what type of support should you consider offering.

Estate Planning Documents

In general, fifty percent (50%) of all families do not have an estate plan. If you are receiving this message, you (and likely your friends and family) probably have complicated enough assets to qualify for needing an estate plan. Further, of the approximate fifty percent (50%) who do have an estate plan, about one-half of those plans are outdated or incorrect, and may likely cause challenges when executing. In short, there is a seventy-five percent (75%) chance your parents’ estate plan is out-of-sorts. Maintaining proper estate planning done is table stakes. You can help by encouraging parents, aunts, and uncles to visit an estate planning attorney. If you need a recommendation, we’re happy to offer you a few names to consider.

Identity Protection

Older Americans are subject to identity theft and could use your help. Consider the following:

  • Credit freeze. Credit bureaus offer this service. Creating a freeze is no charge. The cost for “Lifting” a freeze for specific credit inquiries is nominal – about $10 per service. My family has employed a credit freeze since this option became available in 2003-2004 and has gladly paid for the Lifts as needed. The credit freeze has been our family’s best approach to help prevent credit fraud. It gives me peace of mind that I have control of legitimate credit queries and new accounts.
  • Credit Reports. Review your parent’s credit reports with them to make sure all reported creditors are correct, and to update any other personal information. More importantly, resolve listings of creditors that are incorrect, and consider closing credit that is no longer needed.
  • Personal Information. Drivers licenses, State Identification Cards, Passports, and Social Security Cards. Consider securing in one place items that not regularly used. And ask to make copies for your records, then scan and secure these copies with an encrypted electronic service. For our clients, we offer an electronic vault called WealthVision that features encryption standards that exceed those of many banks. If you don’t work with us, ask your advisor if they offer a similar service.

Telemarketers

  • If not already set up, consider caller-ID for your parent’s home phone. Encourage your parents to let all calls they don’t recognize go to voice mail. This small idea should significantly reduce the risk of telephone scams. This same principal should apply to their cell phones.
  • Add a call blocking tool to the home phone. I don’t know of any service that is full-proof, but having something is a step in the right direction. I’m not entirely delighted with ours, so I if you come across one you have had success with, please let me know.
  • Your parents need to know the difference between someone they call and someone who call them. If they make the call, they know who that other person is. A person calling them with an emergency should be viewed as suspicious. If this happens, encourage your parents to call you or other family members to confirm or for help. Assure them that asking for a number to call back and waiting to confirm is prudent and safer for all family members. If the incoming caller insists and will not leave their name and number, then ask your parents to encourage them to call 911. And tell your parents about the call my mother-in-law received from a kid who started the call with “Grandma?” My mother-in-law filled in the blank and responded by using my daughter’s name, asking if this was her. Fortunately, she knew my daughter’s voice well enough to hang up. Very upsetting for everyone, but it could have been worse.

Technology

  • Cell phones, laptops, iPads. Check them all for updates and patches.
  • Passwords. Consider strengthening passwords and using a password manager to help your parents manage this. If a password manager becomes problematic (they often duplicate entries and cause confusion), using a password that is a combination of things in their life might be the solution. Example: first house address numbers + second home street name + current home city abbreviation + children’s birth years + the number of grandchildren or pets minus the number of previous marriages!
  • Social media. Ask your parents to list for you their various social media accounts and passwords. This idea becomes especially useful as they get too old or unable to use.

Be their advocate. This can include adding yourself to

  • conversations with vendors solving problems.
  • discussions with caregivers. Make sure to take notes.
  • visits with financial advisors. Our most rewarding meeting is with older clients who include their adult children. The synergy can be more productive than a meeting with the parents alone.
  • Ask to be listed as a contingent contact on financial accounts. This option is relatively new and required by financial institutions to be offered. Take advantage of it.

If there is any part of this you would like to explore, feel free to contact Cornerstone Wealth Management at 925-824-2880. We are happy to help if we can.

#ElderCare

#EstatePlanning

#HealthCare

#PersonalAdvice

Leave more for your beneficiaries and charities?

By Cornerstone Wealth Management

Probate costs will reduce estate size. Attorneys fees, court costs, other professional fees and expenses can result in shrinking an estate by up to five percent (5%). For example, with an estate valued at $1 million, settlement costs can be as much as $50,0001. That assumes a routine probate. In addition, the probate process can take over a year to settle.

Where does this money go? If the probate is routine, then these costs are for administration of the settlement process. Few estates require more than that. More complex probates may incur higher cost and potentially require more time to settle. Beneficiaries of small, five-figure estates may be allowed to claim property through affidavit. This option does not apply to larger estates.

The question for those who wish to manage these expenses becomes, how can you exclude more assets from the expense of probate? They key for many is to create a plan that exclude from probate as many assets as possible. What follows are four ideas that have worked for others.

  1. Joint accounts. Married couples may hold property as joint tenants. Jointly titled property includes a right of survivorship and is exempt from probate. At the death of the first spouse, assets then pass to the surviving spouse. State law varies on this matter. Some states allow a variation called tenancy by the entirety, in which married spouses each own an undivided interest in property with the right of survivorship (they need consent from the other spouse to transfer their ownership interest in the property). Other states allow community property with right of survivorship; assets titled in this manner also skip the probate process.2,3 Joint accounts may still face legal challenges. For example, a potential beneficiary to assets in a jointly held bank account may claim that it is not a “true” joint account, but a “convenience account” where a second accountholder was added just for financial expediency. Or, a joint account arrangement with right of survivorship may be found inconsistent with an estate plan.4 While not a solution for all, joint accounts can be a tool that can be effective for many.
  2. POD & TOD accounts. Payable-on-death and transfer-on-death forms are used to permit easy transfer of bank and investment accounts, and in some states, motor vehicles. During the life of the original owner, the named beneficiary has no rights to claim the asset. Upon the owner’s death, the named beneficiary can claim the assets or securities by showing his or her I.D. and valid proof of the original owner’s death5.
  3. Gifting. For 2018, the IRS allows tax free gifts of up to $15,000 per person to as many different people as you like. Gifting will reduce the size of your taxable estate. Gifting over $15,000 per recipient per year may be subject to federal gift tax (which tops out at 40%) and count against your lifetime gift tax exclusion. In 2018, the lifetime individual gift tax exemption is $11.18 million, and $22.36 million for married couples.6,7
  4. Revocable living trusts. In a sense, these estate planning vehicles allow people to do much of their own probate while living. The Grantor – the person who establishes the trust – funds it while alive with up to 100% of his or her assets, designating the beneficiaries of those assets at his or her death. The trust owns assets once owned by the Grantor, yet the Grantor can invest, spend, and manage these assets as if it is their own while alive. Upon the Grantor’s death, the trust becomes irrevocable, and its assets should be able to be distributed by a successor trustee without having to be probated. The distribution is private (as opposed to the completely public process of probate), and it can save heirs court costs and time.8

Are there assets not subject to the probate fees and process? Yes, there are all kinds of non-probate assets. The common denominator of a non-probate asset is that they transfer by beneficiary designation, which allows these assets to pass either to a designated beneficiary or a joint tenant, regardless of what a will states. Examples: assets jointly owned with right of survivorship, trusts and assets held within trusts, TOD accounts, proceeds from life insurance policies, and IRA and 401(k) accounts.9

Make sure to list/update retirement account beneficiaries. When you open a retirement account (such as an IRA), you are asked to designate beneficiaries of that account. This beneficiary form stipulates where these assets will go when you die. A beneficiary form commonly takes precedence over a will.7

Your beneficiary designations need to be reviewed, and updated when appropriate. This will help prevent you from inadvertently leaving an asset to a former spouse or estranged family member.

If you are married and have a workplace retirement account, under federal law, your spouse is the default beneficiary unless he or she in writing declines. Your spouse is automatically entitled to receive 50% of the account assets should you die, even if you designate another person as the account’s primary beneficiary. In contrast, a married IRA owner may name anyone as a primary or secondary beneficiary, without spousal consent.10

If you or someone you know would like to get coaching on approaches to estate planning, we welcome your call.

#Probate #AvoidProbate #ProbateCosts #BeneficiaryDesignation #TOD #POD #EstatePlanning #FinancialPlanning #Gifting #Charity #Taxes #TaxStrategies

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This material was prepared by MarketingPro, Inc. and does not necessarily represent the views of the presenting party nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.1 – nolo.com/legal-encyclopedia/why-avoid-probate-29861.html [9/12/18]
2 – info.legalzoom.com/difference-between-community-property-rights-survivorship-vs-joint-tenancy-21133.html [9/12/18]
3 – law.cornell.edu/wex/tenancy_by_the_entirety [9/12/18]
4 – clarkhill.com/alerts/a-guide-for-challenging-a-joint-account-arrangement-in-michigan [3/16/17]
5 – nolo.com/legal-encyclopedia/avoid-probate-transfer-on-death-accounts-29544.html [9/12/18]
6 – thebalance.com/how-is-the-gift-tax-calculated-3505674 [7/25/18]
7 – marketwatch.com/story/how-to-avoid-making-the-same-mistake-aretha-franklin-did-2018-09-04 [9/4/18]
8 – thebalance.com/how-does-a-revocable-living-trust-avoid-probate-3505224 [7/24/18]
9 – fidelity.com/life-events/inheritance/inheritance-basics/probate [9/12/18]
10 – connorsandsullivan.com/Articles/Beneficiary-Designations-Getting-the-Right-Assets-to-the-Right-People.shtml [9/12/18]

What you should know about naming a minor as an IRA beneficiary.

Can a child inherit an IRA? The answer is yes, though they cannot legally own the IRA and its invested assets. Until the child turns 18 (or 21, in some states), the inherited IRA is a custodial account, managed by an adult on behalf of the minor beneficiary.1,2

IRA owners who name minors as beneficiaries may have good intentions. Their goal may be to “stretch” a large Roth or traditional IRA. Distributions from the inherited IRA can be scheduled over the (long) expected lifetime of the young beneficiary.

Those good intentions may be disregarded, however. When minor IRA beneficiaries become legal adults, they have the right to do whatever they want with those IRA assets. If they want to drain the whole IRA to buy a Porsche or fund an ill-conceived start-up, they can.2

How can you have a say in what happens to the IRA assets? You could create a trust to serve as the IRA beneficiary, as an intermediate step before your heir takes possession of those assets as a young adult.

In other words, you name a trust as the beneficiary of your IRA, and your child or grandchild as a beneficiary of the trust. When you have that trust in place, you have more control over what happens with the inherited IRA assets.2

The trust can dictate the how, what, and when of the income distribution. Perhaps you specify that your heir gets $10,000 annually from the trust beginning at age 30. Or, maybe you include language that mandates that your heir take distributions over their life expectancy. You can even stipulate what the money should be spent on and how it should be spent.2

A trust is not for everyone. The IRA needs to be large to warrant creating one, as the process of trust creation can cost several thousand dollars. No current-year tax break comes your way from implementing a trust, either.2

In lieu of setting up a trust, you could simply name an IRA custodian. In this case, the term “custodian” refers not to a giant investment company, but a person you know and have faith in who you authorize to make investing and distribution decisions for the IRA. One such person could be named as the custodian; another, as a successor custodian.2

What if you designate a minor as the beneficiary of your IRA, but fail to put a custodian in place? If there is no named custodian, or if your named custodian is unable to serve in that role, then a trip to court is in order. A parent of the child, or another party who wants guardianship over the IRA assets, will have to go to court and ask to be appointed as the IRA custodian.2

You should also recognize that the Tax Cuts & Jobs Act reshaped the “kiddie tax.” This is the federal tax on a minor’s net unearned income. Required minimum distributions (RMDs) from inherited IRAs may be subject to this tax. A minor’s net unearned income is now taxed at the same rate as trust income rather than at the parents’ marginal tax rate.3,4

This is a big change. Income tax brackets for a trust or a child under age 19 are now set much lower than the brackets for single or joint filers or heads of household. A 10% rate applies for the first $2,550 of taxable income, but a 24% rate plus $255 of tax applies at $2,551; a 35% rate plus $1,839 of tax, at $9,151; a 37% rate plus $3,011.50 of tax, at $12,501 and up.3,5

While this may be a negative for middle-class families seeking to leave an IRA to a child, it may be a positive for wealthy families: the new kiddie tax rules may reduce the child’s tax liability when compared with the old rules.4

One last note: if you want to leave your IRA to a minor, check to see if the brokerage holding your IRA allows a child or a grandchild as an IRA beneficiary. Some brokerages do, while others do not.1   Due to the complex nature of a trust creation, you should seek the counsel of a legal professional.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.1 – investopedia.com/articles/retirement/09/minor-as-ira-beneficiary.asp [6/19/18]
2 – kiplinger.com/article/retirement/T021-C000-S004-pass-an-ira-to-young-grandkids-with-care.html [5/17]
3 – forbes.com/sites/ashleaebeling/2018/05/08/the-kiddie-tax-grows-up/ [5/8/18]
4 – tinyurl.com/y7bonwzx [5/31/18]
5 – forbes.com/sites/kellyphillipserb/2018/03/07/new-irs-announces-2018-tax-rates-standard-deductions-exemption-amounts-and-more/ [3/7/18]

Some good reasons to retain it.

Do you need a life insurance policy in retirement? One school of thought says no. The kids are grown, and the need to financially insulate the household against the loss of a breadwinner has passed.

If you are thinking about dropping your coverage for either or both of those reasons, you may also want to consider some reasons to retain, obtain, or convert a life insurance policy after you retire. It may be a prudent decision once you take these factors into account.

Could you make use of your policy’s cash value? If you have a whole life policy, you might want to utilize that cash in response to certain retirement needs. Long-term care, for example: you could explore converting the cash in your whole life policy into a new policy with a long-term care rider, which might even be doable without tax consequences. If you have income needs, many insurers will let you surrender a whole life policy you have held for some years and arrange an income contract with the cash value. You can pull out the cash, tax-free, as long as the amount withdrawn is less than the amount paid into the policy. Remember, though, that withdrawing (or taking a loan against) a policy’s cash value naturally reduces the policy’s death benefit.1

Do you receive a “single life” pension? Maybe a pension-like income comes your way each month or quarter, from a former employer or through a private income contract with an insurer. If you are married and there is no joint-and-survivor option on your pension, that income stream will dry up if you die before your spouse dies. If you pass away early in your retirement, this could present your spouse with a serious financial dilemma. If your spouse risks finding themselves in such a situation, think about trying to find a life insurance policy with a monthly premium equivalent to the difference in the amount of income your household would get from a joint-and-survivor pension as opposed to a single life pension.2

Will your estate be taxed? Should the value of your estate end up surpassing federal or state estate tax thresholds, then life insurance proceeds may help to pay the resulting taxes and help your heirs avoid liquidating some assets.

Are you carrying a mortgage? If you have refinanced your home or borrowed to buy a home, a life insurance payout could potentially relieve your heirs from shouldering some or all of that debt if you die with the mortgage still outstanding.2

Do you have burial insurance? The death benefit of your life insurance policy could partly or fully pay for the costs linked to your funeral or memorial service. In fact, some people buy small life insurance policies later in life in preparation for this need.2

Keeping your permanent life policy may allow you to address these issues. Alternately, you may seek to renew or upgrade your existing term coverage. Consult an insurance professional you know and trust for insight.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – forbes.com/sites/forbesfinancecouncil/2018/03/06/using-life-insurance-for-retirement-purposes/ [3/6/18]
2 – nasdaq.com/article/4-reasons-to-carry-life-insurance-in-retirement-cm946820 [4/12/18]

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A quick look at the different types of policies.

When it comes to life insurance, there are many choices. Whole life. Variable universal life. Term. What do these descriptions really mean?

All life insurance policies have two things in common. They guarantee to pay a death benefit to a designated beneficiary after a policyholder dies (although, the guarantee may be waived if the death is a suicide occurring within two years of the policy purchase). All require recurring payments (premiums) to keep the policy in force. Beyond those basics, the differences begin.1

Some life insurance coverage is permanent, some not. Permanent life insurance is designed to cover you for your entire life (not just a portion or “term” of it), and it can become an important element in your retirement planning. Whole life insurance is its most common form.2

Whole life policies accumulate cash value. How does that happen? An insurer directs some of your premium payments into a reserve account and puts those dollars into investments (typically conservative ones). The return on the investments influences the growth of the cash value, which builds up according to a formula the insurer sets.3

A whole life policy’s cash value grows with taxes deferred. After a while, you gain the ability to borrow against that cash value. You can even cancel the policy and receive a surrender value. Premiums on whole life policies, though, are usually higher than premiums on term life policies, and they may rise with time. Also, beneficiaries only receive a death benefit (not the policy’s cash value) when a whole life policyholder dies.2,4

Universal life insurance is whole life insurance with a key difference. Universal life policies also build cash value with taxes deferred, but there is the chance to eventually pay the monthly premiums out of the policy’s investment portion.5

Month by month, some of your premium on a universal life policy gets credited to the cash reserve of the policy. Sooner or later, you may elect to pay premiums out of the cash reserve – so, the policy essentially begins to “pay for itself.” If all goes well, a universal life policy may have a lower net cost than a whole life policy. If the investments chosen by the insurer severely underperform, that can mean a dilemma: the cash reserve of your policy may dwindle and be insufficient to keep paying the premiums. That could mean cancellation of the policy.5

What about variable life (and variable universal life) policies? Variable life policies are basically whole life or universal life policies with a riskier investment component. In VL and VUL policies, you may direct percentages of the cash reserve into investment sub-accounts managed by the insurer. Assets allocated to the sub-accounts may be put into equity investments of your choice as well as fixed-income investments. If you choose equity investments, you (and the insurer) assume greater risk in exchange for the possibility of greater reward. The performance of the subaccounts cannot be guaranteed. As an effect of this risk exposure, a VUL policy usually has a higher annual cost than a comparable UL policy.6

The performance of the stock market may heavily affect the performance of the subaccounts and the policy premiums. A bull market may mean better growth for the policy’s cash value and lower premiums. A bear market may mean reduced cash value and higher monthly payments to keep the policy going. In the worst-case scenario, the cash value plummets, the insurer hikes the premiums in order to provide the guaranteed death benefit, the premiums become too expensive to pay, and the policy lapses.6

Term life insurance is life insurance that you “rent” rather than own. It provides coverage for a set period (usually 10-30 years). Should you die within that period, your beneficiary will get a death benefit. Typically, the premium payments and death benefit on a term policy are fixed from the start, and the premiums are much lower than those of permanent life policies. When the term of coverage ends, you may be offered the option to renew the coverage for another term or to convert the policy to a form of permanent life insurance.2,7

Term life is cheap, but the tradeoff comes when the term is up. Just as you cannot build up home equity by renting, you cannot build up cash value by “renting” life insurance. When the term of coverage is over, you usually walk away with nothing for the premiums you have paid.7

Which coverage is right for you? Many factors may come into play when deciding which type of life insurance will suit your needs. The best thing to do is to speak with a qualified insurance professional who can help you examine these factors, so you can determine which type of coverage may be appropriate.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – thebalance.com/does-a-life-insurance-policy-cover-suicide-2645609 [6/5/18]
2 – fool.com/retirement/2017/07/20/term-vs-whole-life-insurance-which-is-best-for-y-2.aspx [7/20/17]
3 – investopedia.com/articles/personal-finance/082114/how-cash-value-builds-life-insurance-policy.asp [4/30/18]
4 – insure.com/life-insurance/cash-value.html [12/12/17]
5 – thebalance.com/what-you-need-to-know-about-universal-life-insurance-2645831 [5/8/18]
6 – insuranceandestates.com/top-10-pros-cons-variable-universal-life-insurance/ [9/1/17]
7 – consumerreports.org/life-insurance/how-to-choose-the-right-amount-of-life-insurance/ [3/30/18]

Why you should periodically review beneficiary designations.

Your beneficiary choices may need to change with the times. When did you open your first IRA? When did you buy your life insurance policy? Are you still living in the same home and working at the same job as you did back then? Have your priorities changed a bit – perhaps more than a bit?

While your beneficiary choices may seem obvious and rock solid when you initially make them, time has a way of altering things. In a stretch of five or ten years, some major changes can occur in your life – and they may warrant changes in your beneficiary decisions. In fact, you might want to review them annually.

Beneficiary designations commonly override bequests made in a will or living trust. Many people do not realize this. When assets have designated beneficiaries, they can usually avoid probate and transfer directly to that person.1,2

You may have chosen the “smartest financial mind” in your family as your beneficiary, thinking that he or she has the knowledge to carry out your financial wishes in the event of your death. But what if this person passes away before you do? What if you change your mind about the way you want your assets distributed and are unable to communicate your intentions in time? And what if he or she inherits tax problems as a result of receiving your assets?

Are your beneficiary designations up to date? Don’t assume. Don’t guess. Make sure your assets are set to transfer to the people or institutions you prefer. If you’re not certain you understand all the possible ramifications of your selections, you may want to reach out to a qualified financial professional for guidance.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – thebalance.com/why-beneficiary-designations-override-your-will-2388824 [8/28/17]
2 – wealthmanagement.com/estate-planning/designating-beneficiary-not-easy-it-looks [4/23/18]