Estate planning involves so much more than living trusts and wills. Everyone must look at their assets, examine how title is held, evaluate the tax issues and ensure beneficiary designations are proper. Most people require professional assistance with their estate plan. Problems usually come to light after a death, when there is no “quick fix” available.
Significant taxes, surrender charges and court costs may be required to transfer the assets to the beneficiaries. These problems can be avoided with advance planning. The following are some typical stories where lack of planning cost families and beneficiaries a great deal.
• A gentleman died naming his minor grandchildren as beneficiaries on his bank accounts and IRA. The bank refused to release the funds unless the court appointed a guardian for the grandchildren’s estate because a minor child cannot legally receive money. If the man had planned ahead, and set up a trust for the grandchildren, the funds could have been properly managed without expensive court supervision.
• A woman had all her savings in U.S. Savings bonds. She wanted her adult children to inherit these bonds. Ultimately, the children inherited the bonds, as well as a very large tax bill. She should have investigated any one of a number of other investments, which would have passed tax-free to the children. Instead, Uncle Sam received a nice gift due to lack of proper planning.
• An elderly man had a 10-year-old will when he passed away. His named beneficiaries had died and no other successor beneficiaries were named. His assets were probated and distant relatives received a portion of his estate, instead of the charities he had supported throughout his life. Better advance planning could have prevented this situation.
• A woman changed the “owner” of her annuity to her living trust and also named the trust as the primary beneficiary. When she passed away, the annuity company charged a large surrender penalty due to this incorrect titling. Additionally, a large tax bill was due because of her poor choice of beneficiaries. If she had “owned” the annuity and named her adult children as beneficiaries, the surrender charges and substantial taxes could have been avoided.
Proper planning now with competent legal and financial advice will help to avoid problems later for your family and heirs.
For more information, please call Jane M. McNamara, Esq. at 661-287-3260.