Are Your Beneficiaries Up-to-Date?

Typically, when you establish your Living Trust, planning your Estate does not stop there. Generally speaking, the Living Trust you create does not control the distribution of assets like your retirement accounts, Annuities or Life Insurance Policies. Assets such as these have a Beneficiary Designation Form (BDF), and these forms control the distribution of your accounts to your heirs. Often times, these forms are not updated after they’ve been created and this mistake may inadvertently create a massive tax liability of your estate without you even realizing it.

Here’s an example of a true story of a couple, we’ll call them Frank and Karen, to protect their identity. Frank and Karen went to a local Attorney and created their Living Trust and thought they were good to go. Five years later, they retired, and went to their Financial Advisor who helped them positon their investments to generate the income they needed for retirement. Frank and Karen then went off and enjoyed retirement. Years later, after they both passed away, their entire $1 million IRA was taxed immediately and became $600,000. Because they missed properly completing their BDF’s, it created a $400,000 income tax liability the day the surviving spouse passed away.
Their Attorney, CPA and Financial Advisor never took the time to properly review their BDF’s to make sure they were set up correctly. Frank and Karen just assumed because they had a Living Trust that their estate plan was in order. The Attorney assumed the CPA would look at these forms because he felt it was a tax issue. The CPA assumed the Financial Advisor would review these forms because he felt it was a financial issue and the Financial Advisor assumed the Attorney would review them because he felt it was an estate planning issue.
The lesson here is proper estate planning includes more than just creating a Living Trust. Has your advisor ever sat down to review your Trust and Beneficiary Forms with you? If not, you may unknowingly be setting yourself up for a significant, unnecessary, tax liability on your heirs when you step out of life. Here’s my recommendation, if you haven’t done so already, I encourage you to call our office (775) 853-9033 and meet with one of our advisors to go through our complimentary Complete Planning Review.