Four Common and Costly Estate Planning “Administration” Mistakes
By Christian Cordoba, CFP
From incapacity planning to legacy and gifting intentions, a well-constructed
estate plan can be one of the greatest gifts you provide your loved ones
to remove unnecessary stress during an emotional time of loss—but
only if it is properly executed. Be sure to check your estate plan for
these critical financial planning updates.
The administrative and claiming side of estate planning which occurs after
you’re gone requires critical attention to detail and ongoing review
to ensure your intentions and assets maintain alignment. Following are
some of the biggest and most common mistakes to avoid.
Not retitling assets in the name of the trust
One key function a trust provides is the ability for assets to bypass the
high expense, lengthy time and public exposure of the probate process.
However, if assets are not retitled into the name of the trust, they will
not be protected under its provisions. Even if the assets are specified
within the trust, they must be titled properly for the trust to take effect.
Not creating a strategic plan for retirement accounts
A caveat to the previous rule, retirement accounts are inherently structured
for individuals, so retitling to change ownership can quickly trigger
significant and irreversible taxable events. Similarly, naming a trust
as the beneficiary to inherit retirement accounts can also carry unique
limitations and tax considerations. To help preserve the tax benefits
of these retirement assets for future generations, be sure to discuss
these assets with a professional trained in the advanced tax laws and
strategies surrounding the complexities of retirement accounts.
Not updating designated beneficiary forms
Designated beneficiary forms on all financial accounts are king and trump
all other estate planning documents. Be sure to regularly review these
forms and keep them up-to-date with your intended, chosen beneficiaries.
Not communicating with your beneficiaries
Having a proactive conversation with your heirs about your intentions can
help alleviate potential family conflict caused by speculation about your
wishes. It can also provide the proper guidance for your heirs to maximize
their inherited assets. When and how they receive their funds or how they
retitle assets can result in costly taxes, fees or penalties. Surviving
spouses, in particular, will have important decisions surrounding retirement
accounts as to whether they should be titled as inherited accounts or
rolled over into their own name—both options carrying different
implications for taxes and regulation.
Your heirs will benefit from the special attention you give to these aspects
of your estate plan in your planning process.
Christian Cordoba, RFC®, CFS, is a CERTIFIED FINANCIAL PLANNERTM, Master Elite IRA Advisor and founder of California Retirement Advisors
located in El Segundo. He is a member of Torrance Memorial’s Professional
Advisory Council. www.CRAretire.com. (310) 643-7472.
Investment advisory services provided by California Retirement Advisors
Group, Inc. and First Allied Advisory Services, Inc., both registered
investment advisers. Registered representatives and financial consultants
offering securities through First Allied Securities, Inc., a registered
broker/dealer, member FINRA/SIPC. California Retirement Advisors Group
is not affiliated with First Allied Securities Inc. and First Allied Advisory
Services, Inc. CA Insurance license #0B09076.