Beneficiary designations, account titling (ownership arrangements), and traditional estate planning tools (trusts and last wills) work together to create a fully functioning estate plan. A common mistake made with beneficiary designations and ownership arrangements includes not naming a beneficiary at all.
Without naming a beneficiary on your life insurance policy or retirement account, upon your death the asset will pass pursuant to your last will and testament, if you have one, pursuant to the laws of intestacy, or by contractual provisions that name default beneficiaries. Of course, the result may not be consistent with your wishes.
If the asset is an IRA there may also be avoidable tax consequences. Instead of being able to stretch the benefits over the life of the beneficiary the IRA may need to be withdrawn over a period of five years.
Over the next several posts we will explore these common mistakes in more detail.
To be continued….
Aaron E. Futterman, CPA, Esq. is a partner in the law firm of Futterman & Lanza, LLP with offices in Smithtown, NY and clients throughout Suffolk, Nassau, Queens, Brooklyn, Bronx, Richmond, New York, Westchester and Rockland Counties. He concentrates his practice to Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration.