What are Mistakes to Avoid with Beneficiary Designations?

Many people don’t know that their will doesn’t control who inherits all of their assets when they die. Some assets pass by beneficiary designation. Assets like life insurance, annuities and retirement accounts all pass by beneficiary designation.

Kiplinger’s recent article entitled “Beneficiary Designations: 5 Critical Mistakes to Avoid” lists five critical mistakes to avoid when dealing with your beneficiary designations:

Failing to designate any beneficiary at all. Many people forget to name a beneficiary for retirement accounts or life insurance. They may forget, didn’t know they had to, or just never got around to filling out the forms. If you don’t name a beneficiary for life insurance or retirement accounts, the company will apply its rules about where the assets will go after you die. For life insurance, the proceeds will typically be paid to your probate estate. For retirement benefits, if you’re married, your spouse will most likely receive the assets. However, if you’re unmarried, the retirement account will likely be paid to your probate estate, which has negative income tax ramifications.
Failing to consider special circumstances. Not every family member should get an asset directly. This includes minor children, those with specials needs and people who can’t manage assets or with creditor issues.
Misspelling a beneficiary’s name. Beneficiary designation forms can be filled out incorrectly and the beneficiary designation form may not be specific. People also change their names through marriage or divorce, or assumptions can be made about a person’s legal name that later prove incorrect. Failing to have names match exactly can cause delays in payouts, and in a worst-case scenario of two people with similar names, it can result in a court case.
Forgetting to update your beneficiaries. Your choice of beneficiary may likely change over time as circumstances change. Naming a beneficiary is part of an overall estate plan, and just as life changes, so should your estate plan. Beneficiary designations are an important part of that plan—make certain that they’re updated regularly.
Failing to review beneficiary choices with legal and financial advisers. How beneficiary designations should be completed is a component of an overall financial and estate plan. Involve your legal and financial advisers to determine what’s best for your circumstances. Note that beneficiary designations are designed to guarantee that you have the ultimate say over who will get your assets when you pass away. Taking the time to carefully (and correctly) choose your beneficiaries and then periodically reviewing those choices and making any necessary updates will allow you to remain in control of your money.

Reference: Kiplinger (June 6, 2022) “Beneficiary Designations: 5 Critical Mistakes to Avoid”

When Should I Hire an Estate Planning Attorney?

Kiplinger’s recent article entitled “Should I Hire an Estate Planning Attorney Now That I Am a Widow?” describes some situations where an experienced estate planning attorney is really required:

Estates with many types of complicated assets. Hiring an experienced estate planning attorney is a must for more complicated estates. These are estates with multiple investments, numerous assets, cryptocurrency, hedge funds, private equity, or a business. Some estates also include significant real estate, including vacation homes, commercial properties and timeshares. Managing, appraising and selling a business, real estate and complex investments are all jobs that require some expertise and experience. In addition, valuing private equity investments and certain hedge funds is also not straightforward and can require the services of an expert.

The estate might owe federal or state estate tax. In some estates, there are time-sensitive decisions that require somewhat immediate attention. Even if all assets were held jointly and court involvement is unnecessary, hiring a knowledgeable trust and estate lawyer may have real tax benefits. There are many planning strategies from which testators and their heirs can benefit. For example, the will or an estate tax return may need to be filed to transfer the deceased spouse’s unused Federal Estate Unified Tax Credit to the surviving spouse. The decision whether to transfer to an unused unified tax credit to the surviving spouse is not obvious and requires guidance from an experienced estate planning attorney.

Many states also impose their own estate taxes, and many of these states impose taxes on an estate valued at $1 million or more. Therefore, when you add the value of a home, investments and life insurance proceeds, many Americans will find themselves on the wrong side of the state exemption and owe estate taxes.

The family is fighting. Family disputes often emerge after the death of a parent. It’s stressful, and emotions run high. No one is really operating at their best. If unhappy family members want to contest the will or are threatening a lawsuit, you’ll also need guidance from an experienced estate planning attorney. These fights can result in time-intensive and costly lawsuits. The sooner you get legal advice from a probate attorney, the better chance you have of avoiding this.

Complicated beneficiary plans. Some wills have tricky beneficiary designations that leave assets to one child but nothing to another. Others could include charitable bequests or leave assets to many beneficiaries.

Talk to an experienced attorney, whose primary focus is estate and trust law.

Reference: Kiplinger (July 5, 2022) “Should I Hire an Estate Planning Attorney Now That I Am a Widow?”

Did Former NFL Tackle and Fox Sports Commentator Tony Siragusa have an Estate Plan?

In June 2022, former NFL tackle and Fox Sports commentator Tony “The Goose” Siragusa died at the age of 55. The death of the popular athlete was confirmed to TMZ Sports by Siragusa’s former teammate Jamal Lewis. Lewis also played on the Baltimore Ravens Super Bowl winning team in 2001.

MSN’s recent article entitled “What Was NFL Legend Tony Siragusa’s Net Worth When He Died?” says that no cause of death was included with the announcement of Siragusa’s passing.

Siragusa was first drafted by Indianapolis and played a dozen years in the NFL before working more than 10 years on the sidelines for Fox Sports.

In a 2012 interview with Howard Stern, he revealed that his father died young from a heart attack at the age of 48, and that heart disease runs in the Siragusa family.

As a success both before and after his playing career, Tony left behind a sizable net worth when he died.

At the time that Siragusa died in 2022 his net worth was $6 million, according to Celebrity Net Worth. He also earned a $500,000 annual salary for his on-camera work with “Fox on Sunday.”

In addition to the money Siragusa made through football both in the game and on the sidelines, he was also an actor. Siragusa had a role in the hit HBO TV series “The Sopranos,” as well as other parts. Siragusa also hosted “Man Caves” on the DIY Network, as well as other TV appearances.

As news of Siragusa’s death spread, Indianapolis Colts owner Jim Irsay tweeted that Siragusa was the strongest player he’d ever seen in Irsay’s’ half-century in football. Siragusa was drafted by Indianapolis in 1990.

“I’m heartbroken as is all of Colts Nation,” Irsay also tweeted.

Siragusa is survived by his wife, Kathy Siragusa, and their three children.

Referring to the death of his former teammate, Jamal Lewis said, “It’s a sad day to be a Raven.”

Reference: MSN (June 22, 2022) “What Was NFL Legend Tony Siragusa’s Net Worth When He Died?”

Do I Need All Insurance after 65?

Seniors should be cautious about canceling their insurance policies. Consider your future insurability and your individual circumstances and life goals. There’s no one answer that fits everyone.

The primary purpose of life insurance is to replace lost income. Retirees may still want to keep their coverage because it can be an important tool in wealth transfer to the next generation.

US News’ recent article entitled “The Only Insurance Policies You Need After Retirement” advises that these guidelines can help determine which policies are essential and which could be a waste of money. Let’s look at how to decide which policies you need and which you can skip after age 65.

Must-Have Policies for Seniors. These two types of insurance are necessary for seniors.

Medical Insurance. The increasing cost of health care that comes with advanced age is a big reason to buy medical insurance. The Affordable Care Act requires everyone to maintain coverage. Most seniors 65+ are eligible for Medicare, and those still working may have benefits through their job. Note that Medicare doesn’t cover all medical costs, so look at buying a supplemental plan, such as Medigap and Part D coverage, to help pay for services not fully covered by Original Medicare. A Medicare Advantage Plan offered by private insurers is another way to fill in coverage gaps.
Homeowners or Renters Insurance. Seniors with valuable jewelry or other items may need to add a rider to their policy to fully insure these possessions. Mortgage lenders require homeowners to maintain coverage, but once the loan is paid off, it’s not required. It may be tempting to save money by canceling the policy, but that could be a costly mistake. That’s because a big loss would have to be replaced with savings.

Some Smart Options. There are other types of insurance that could be helpful to seniors.

Travel Insurance. Those who plan to travel extensively may want to buy travel insurance. Find a policy that includes features, such as emergency medical and medical evacuation services along with trip delay or cancellation insurance.
Auto Insurance. Auto insurance is required in almost every state. Any senior who is still driving and owns a vehicle should insure it properly.
Umbrella Insurance. This insurance provides additional liability coverage above and beyond what’s included in homeowner and car insurance. Your volunteer activities could put you at risk for a liability claim and warrant added insurance coverage.
An immediate annuity can help guard against outliving savings by providing a guaranteed source of income. Annuities can be purchased for a lump sum amount and provide monthly payments that are based on a person’s age and the purchase price.
Long-Term Care Insurance. Medicare won’t pay for ongoing custodial care in a nursing home or assisted living facility, and Medicaid is only available after a person has depleted almost all their assets.

One Type of Insurance to Cancel. Seniors who aren’t working don’t have a need for disability insurance.

Reference: US News (Feb. 27, 2020) “The Only Insurance Policies You Need After Retirement”

Addressing Vacation Home in Another State in Estate Planning

Many families have an out-of-state cabin or vacation home that’s passed down by putting the property in a will. While that’s an option, this strategy might not make it as easy as you think for your family to inherit this home in the future.

Florida Today’s recent article entitled “Avoiding probate: What is the best option for my out-of-state vacation home?” explains the reason to look into a more comprehensive plan. While you could just leave an out-of-state vacation home in your will, you might consider protecting your loved ones from the often expensive, overwhelming and complicated process of dealing both an in-state probate and an out-of-state probate.

There are options to help avoid probate on an out-of-state vacation home that can save your family headaches in the future. Let’s take a look:

Revocable trust: This type of trust can be altered while you’re still living, especially as your assets or beneficiaries change. You can place all your assets into this trust, but at the very least, put the vacation home in the trust to avoid the property going through probate. Another benefit of a revocable trust is you could set aside money in the trust specifically for the management and upkeep of the property, and you can leave instructions on how the vacation home should be managed upon your death.
Irrevocable trust: similar to the revocable trust, assets can be put into an irrevocable trust, including your vacation home. You can leave instructions and money for the management of the vacation home. However, once an irrevocable trust is established, you can’t amend or terminate it.
Limited liability company (LLC): You can also create an LLC and list your home as an asset of the company to eliminate probate and save you or your family from the risk of losing any other assets outside of the vacation home, if sued. You can protect yourself if renting out a vacation home and the renter decides to sue. The most you could then lose is that property, rather than possibly losing any other assets. Having beneficiaries rent the home will help keep out-of-pocket expenses low for future beneficiaries. With the creation of an LLC, you’re also able to create a plan to help with the future management of the vacation home.
Transfer via a deed: When you have multiple children, issues may arise when making decisions surrounding the home. This is usually because your wishes for the management of the house are not explicitly detailed in writing.
Joint ownership: You can hold the title to the property with another that’s given the right of survivorship. However, like with the deed, this can lead to miscommunication as to how the house should be cared for and used.

Plan for the future to help make certain that the property continues to be a place where cherished memories can be made for years to come. Talk to a qualified estate planning attorney for expert legal advice for your specific situation.

Reference: Florida Today (July 2, 2022) “Avoiding probate: What is the best option for my out-of-state vacation home?”

When Should I Revise My Will?

Just as your life changes, so should your will. You may need to replace an executor, update accounts, or adjust heirs. If you have an estate plan with greater wealth or need more complex arrangements, such as trusts or guardianship provisions, may want to work with an experienced estate planning attorney, says US News’ March 2018 article entitled “4 Times It Makes Sense to Revise Your Will.” Let’s look at the four events:

You’ve experienced a significant life event. This may be a marriage, a divorce, the birth of a child, remarriage or the death of a loved one. These changes may require that new heirs be added to a will or others removed. These life events may also influence how assets are divided in the will. In addition, if you move to a new state, update your will to ensure it adheres to the laws there.
A person in your will has experienced a significant life event. Wills also include executors, trustees and guardians. These individuals may move, get married or become sick or disabled, all of which could change whether they are appropriate for the role listed in your will.
The tax laws have changed. A will may be written to minimize the effects of estate taxes. When laws change, the provisions of the will may need to be updated. For example, in 2017, $5.49 million of a person’s estate was exempt from the 40% federal estate tax. Under the Tax Cuts and Jobs Act, $12.06 million of an estate is currently exempt from the tax in 2022. This could mean that some families no longer need to worry about paying an estate tax and could eliminate the need for some trusts or other provisions in a will.
If it’s been three to five years. It’s smart to review a will at least every three to five years and ensure that all provisions are still in line with your wishes.

While you’re reviewing your will, don’t forget to also review beneficiaries on bank accounts, retirement funds and life insurance. Remember that a named beneficiary trumps the will.

Make sure that all that hard work on your will does not go to waste, by reviewing and updating the document periodically to make sure it reflects the changing landscape of your life.

When you have the will updated, be sure to store it in a secure location, like a fire-proof safe, and let your executor know where to find it. If an attorney drew up your will, they’ll be happy to store at least a digital copy for you.

Reference: US News (March 30, 2018) “4 Times It Makes Sense to Revise Your Will”

How Do I Maximize My IRA?

IRAs are valuable tools for retirement savings because they offer tax benefits in exchange for putting aside money for your golden years. Money Talks News’ recent article entitled “8 Ways to Maximize Your Traditional or Roth IRA” explains that contributions to IRAs are capped at $6,000 per year for most people, and that can make it difficult to amass the $1 million some people suggest is needed for retirement. Nonetheless, you can maximize your IRA contributions – both this year and over time – by using these ideas.

Know your IRA options. See if you’re eligible to open a specialized IRA with a higher contribution limit. Self-employed people can also contribute to a SEP IRA. These Simplified Employee Pension plans let workers save 25% of their compensation.
Don’t forget about the catch-up contributions. When you reach 50, you’re eligible to make catch-up contributions to traditional and Roth IRAs. It’s another $1,000 a year. Therefore, everyone age 50+ can contribute a total of $7,000 to their IRA for 2022.
Take advantage of a spousal IRA. You typically need to earn taxable income to contribute to an IRA. However, there’s an exception for spouses. A non-working spouse can set up and contribute to an IRA, as long as their spouse has taxable income. However, if you file your taxes separately, you’ll miss out on this opportunity. Your total IRA contributions also can’t exceed the taxable income reported on your joint return.
Make regular contributions throughout the year. If you wait for a year-end bonus to make your annual IRA contribution, you might be shortchanging yourself. Try to make small monthly contributions. Known as dollar-cost averaging, this makes saving money a habit and can result in more efficient investments. It may help your IRA grow more quickly.
Start contributing as early as possible. It’s never too early to begin saving for retirement, so open an IRA as soon as you’re able and start your deposits as early in the year as possible.
Look into a Roth conversion. Both traditional and Roth IRAs offer tax advantages. However, they differ. A traditional account offers an immediate tax deduction on contributions and then taxes withdrawals in retirement as regular income. With a Roth, there’s no tax deduction for contributions. However, the money is tax-free in retirement. If you have a traditional IRA, you can convert it to a Roth account.
Invest for the long term. As far as your money in your IRA, “set it and forget it.” Moving it around frequently could incur fees and selling off investments during a down market simply means you’ll be locking in losses. Determine the appropriate investment strategy for your goals and risk tolerance and then stay with it. And remember that you may have to ride out some short-term bumps in the market to maximize your long-term gains.
Talk to an expert. For savvy investors and those with the time and inclination to research investment choices, managing an IRA can be a viable option. For others, using a professional can save time and may result in better returns.

Reference: Money Talks News (Dec. 20, 2021) “8 Ways to Maximize Your Traditional or Roth IRA”

Do I Need an Estate Plan If I’m 25?

Florida Today’s recent article entitled “No matter your age, income or crushing debt, you should have an estate plan” explains that the purpose of a good estate plan is that it allows you to maintain control over how your assets are distributed if you die.

It names someone to make decisions for you, if you can no longer act for yourself. Let’s look at the different documents that are necessary.

Power of attorney: If you become incapacitated, someone still needs to pay your bills and handle your finances. A POA names the person you’d want to have that responsibility.

Health care surrogate: This document is used if you become incapacitated and appoints the individual whom you want to make health care decisions on your behalf.

Last will and testament: This document designates both who oversees your estate, who gets your assets and how they should be transferred.

Beneficiary designations: Part of your planning is to name who should receive money from life insurance policies, annuities, retirement accounts and other financial accounts.

HIPAA Waiver: This is a legal document that allows an individual’s health information to be used or disclosed to a third party. Without this, loved ones may not be able to be a part of decisions and treatment.

Trust. A trust can facilitate passing property to your heirs and potentially provide tax benefits for both you and your beneficiaries.

As you can see, there are a number of reasons to have an estate plan.

Estate planning isn’t only for the rich, and it doesn’t have to be overly complicated.

An experienced estate planning lawyer, also called a trusts and estates attorney, can work with you to create an estate plan customized to your needs, financial affairs and family situation.

Putting your wishes in writing will make certain that your affairs are in order for now and in the future and help your family.

Reference: Florida Today (May 28, 2022) “No matter your age, income or crushing debt, you should have an estate plan”

How Do IRAs and 401(k)s Fit into Estate Planning?

When investing for retirement, two common types of accounts are part of the planning: 401(k)s and IRAs. J.P. Morgan’s recent article entitled “What are IRAs and 401(k)s?” explains that a 401(k) is an employer-sponsored plan that lets you contribute some of your paycheck to save for retirement.

A potential benefit of a 401(k) is that your employer may match your contributions to your account up to a certain point. If this is available to you, then a good goal is to contribute at least enough to receive the maximum matching contribution your employer offers. An IRA is an account you usually open on your own. As far as these accounts are concerned, the key is knowing the various benefits and limitations of each type. Remember that you may be able to have more than one type of account.

IRAs and 401(k)s can come in two main types – traditional and Roth – with significant differences. However, both let you to delay paying taxes on any investment growth or income, while your money is in the account.

Your contributions to traditional or “pretax” 401(k)s are automatically excluded from your taxable income, while contributions to traditional IRAs may be tax-deductible. For an IRA, it means that you may be able to deduct your contributions from your income for tax purposes. This may decrease your taxes. Even if you aren’t eligible for a tax-deduction, you are still allowed to make a contribution to a traditional IRA, as long as you have earned income. When you withdraw money from traditional IRAs or 401(k)s, distributions are generally taxed as ordinary income.

With Roth IRAs and Roth 401(k)s, you contribute after-tax dollars, and the withdrawals you take are tax-free, provided that they’re a return of contributions or “qualified distributions” as defined by the IRS. For Roth IRAs, your income may limit the amount you can contribute, or whether you can contribute at all.

If a Roth 401(k) is offered by your employer, a big benefit is that your ability to contribute typically isn’t phased out when your income reaches a certain level. 401(k) plans have higher annual IRS contribution limits than traditional and Roth IRAs.

When investing for retirement, you may be able to use both a 401(k) and an IRA with both Roth and traditional account types. Note that there are some exceptions to the rule that withdrawals from IRAs and 401(k)s before age 59½ typically trigger an additional 10% early withdrawal tax.

Reference: J.P. Morgan (May 12, 2021) “What are IRAs and 401(k)s?”

What Exactly Is a Prenup?

There are some important financial decisions that need to be made before you get hitched. One of them is whether you should get a prenuptial agreement (“prenup”). This isn’t the most romantic issue to discuss, especially because these agreements usually focus on what will happen in the event of the marriage ending. However, in many cases, having tough conversations about the practical side of marriage can actually bring you and your spouse closer together.

JP Morgan’s recent article entitled “What to know about prenups before getting married” explains that being prepared with a prenup that makes both people in a marriage feel comfortable can be a great foundation for building a financially healthy and emotionally healthy marriage.

A prenup is a contract that two people enter before getting married. The terms outlined in a prenup supersede default marital laws, which would otherwise determine what happens if a couple gets divorced or one person dies. Prenups can cover:

How property, retirement benefits and savings will be divided if a marriage ends;
If and how one person in the couple is allowed to seek alimony (financial support from a spouse); and
If one person in a couple goes bankrupt.

Prenups can be useful for people in many different income brackets. If you or your future spouse has a significant amount of debt or assets, it’s probably wise to have a prenup. They can also be useful if you (or your spouse) have a stake in a business, have children from another marriage, or have financial agreements with an ex-spouse.

First, have an open and honest conversation with your spouse-to-be. Next, talk to an attorney, and make sure he or she understands you and your fiancé’s unique goals for your prenup. You and your partner will then compile your financial information, your attorney will negotiate and draft your prenup, you’ll review it and sign it.

Remember that a prenup can be a useful resource for couples in many different circumstances.

It might feel overwhelming to discuss a prenup with your fiancé, but doing this in a non-emotional, organized way can save a lot of strife in the future and could help bring you closer together ahead of your big day.

Reference: JP Morgan (April 4, 2022) “What to know about prenups before getting married”

Estate Planning Blog Articles

Estate & Business Planning Law Firm Serving the Providence & Cranston, RI Areas

What are Mistakes to Avoid with Beneficiary Designations?

When Should I Hire an Estate Planning Attorney?