Episode Eleven: Protecting Your Estate Plan
In this episode, Lance and Randy discuss the need to protect your estate plan so that those you designate to inherit your assets when you pass away can acquire them in an efficient manner. Included among their topics is the importance of “beneficiary designation” and the importance of keeping your beneficiaries up to date as life circumstances evolve.
What you’ll learn in this episode:
- Randy mentions, in blunt terms, the most important questions that need to be addressed: How do I get the stuff I have to the people I want when I’m dead? How do I pass the stuff that I have on to estate, whether it’s going to my wife, children, grandchildren, whatever? Or go to charity? The key is to take action so that, whoever you choose, you pass it on efficiently.
- The majority of people do not have a trust in place that designates who will inherit their assets. When people are busy with life, many consider it “important, but not urgent.” Randy hopes more people will change that attitude and take care of business.
- Randy explains the term “beneficiary designation,” which is the beneficiary you name when you open a savings account, take out life insurance or secure almost any kind of financial asset. But with retirement accounts, the custodians of the accounts are not required to force you to give a beneficiary. The beneficiary designation is important for a number of reasons. First and foremost, it “trumps the trust.” It’s also simple and free. You just have to fill out some forms.
- Complications with the beneficiary designation can occur if you don’t update it to reflect the changes in your life. One example is designating your first wife the beneficiary and not updating if you happen to get married a second time. Randy stresses the importance of reviewing the details related to your assets and policies often. “You need to put into place the designations that you want today, based on your situation today,” he says.
- A nightmare scenario can occur with assets that have no beneficiary designation. When you die, they go wherever state law determines – which means that the assets could end up in probate court, which involves legal fees and a long, torturous path towards it going to your rightful heirs.
- You have to designate specific people as beneficiaries – not “my daughter and all her children,” for instance. Each financial institution has its own set of rules, but that’s the general rule.
- Randy discusses his financial planning system called the “4×4 Financial Independent Plan.” It has 12 Foundational (Financial) Modules,” or processes that he and his team put in place. One of the modules is called The Estate Plan Protector. With his clients, he goes through the process of identifying the assets and contacts their custodians to secure proof that what they have on record as the beneficiary. If there’s no beneficiary, or an outdated one, an amendment is made. Once his client has this “last master list,” he/she can go ahead and manage it.
- The different types of assets that need to be addressed are: life insurance, checking and savings accounts, CDs, IRAs and retirement plans. A lot of people want to make their trust the beneficiary of a retirement plan, but Randy says it’s the wrong approach because you lose the ability to “stretch.”
- With a “stretch,” if you die, the money can stay in a tax deferred account, growing tax deferred, or maybe tax free if it’s a Roth. But if it’s put into a trust whose language isn’t set up properly, it might have to be distributed immediately. Randy says, “Again, the benefit of the designated beneficiary is that it avoids probate.”
- Real estate is not a designated beneficiary. With real estate, you need a trust because you want to avoid probate and you want to have another exchange mechanism asset besides a designated beneficiary like a brokerage account.
- Lance suggests that everyone check out their beneficiary designations and make sure everything is squared away so “your ex-wife or ex-husband’s not going to be benefiting upon your passing. There’s your motivation right there.
Resources:
Grab a FREE Copy of Lance’s Best Selling Book, How to Make Big Money in Small Apartments here.
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