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Are You Guilty of These Beneficiary Designation Mistakes? Video - YouTube
Channel: True North Retirement
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Mistakes made on your beneficiary forms
could prove costly for your loved ones
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or worse caused your assets to be
split in ways you never intended.
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So in today's video I'm talking about
mistakes that you might be making with
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your beneficiaries. These are mistakes
that I see over and over and over again.
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The good news is is that you
can rectify these mistakes.
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It's just a few little steps to do that.
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Taking the time to review
your beneficiaries,
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make sure that they're all in line.
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Hi there, my name is Ashton Micciche,
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CEO and co owner of True North Retirement
Advisors where we help business owners
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transition into retirement and
successfully exit their business. Okay,
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so let's take a look at
beneficiary mistakes.
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This is a video I've been
wanting to do for a really,
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really long time because I
see these mistakes made over
and over and over again.
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Mistake number one that I see all the
time is that a lot of clients assume that
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their will has them covered. Like,
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it doesn't matter what I
put on my beneficiary forms,
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my wills all taken care of and my
will spells out who gets that money.
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Or worse if you name your
estate as your beneficiary.
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So first of all, I want to
address the first problem,
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which is assuming your will has
you covered because it does not.
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Whatever you put as your beneficiaries,
it doesn't matter what your will says,
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whatever you put as your
beneficiaries on your IRAs form,
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your transfer on death accounts,
your life insurance policies,
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whatever you put for those beneficiaries,
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in most cases it's going to override
whatever you put on your will.
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Your will could say something completely
different than what your beneficiaries
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on your policy or your account and
whatever your beneficiary say is,
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that's where that money's going
to transfer to upon your death.
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So be careful about that. Okay.
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Then the other mistake that I see related
to your will and your state in this
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area is that sometimes people will
actually name their estate as the
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beneficiary. This
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often a tremendously detrimental
thing to do for a couple of reasons.
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Okay.
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One is that let's say you were married
but your spouse passed away and now your
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beneficiaries are your two kids. But
instead of naming them as individuals,
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as beneficiaries, you
name your estate, okay,
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here's where the problem comes
in. If you name your estate,
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that IRA money will not transfer
directly to them. In most cases,
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when you name a child,
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they get to open and transfer your
IRA money or 401k money into a,
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what's known as an inherited IRA.
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And what this allows them to do is allows
them to, to stretch that money out.
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They can continue to invest it, they
can continue to allow that money grow,
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and importantly, they don't
have to pay the taxes up front.
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If you name your estate that you,
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you're not going to allow for that tax
free growth to continue and they won't be
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able to open the inherited IRA.
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They'll pay the taxes on it
once and then it'll be done.
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So they give up a huge tax benefit to
letting that money continue to grow.
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They also give up the growth potential
from letting that money continue to grow.
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Now, of course I am not an attorney,
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nor do I play one in this video.
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So very important for all of
these points that I'm making.
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Be sure before you do anything to always
consult your a state attorney and don't
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be penny wise and pound foolish because
mistakes made on beneficiaries and not
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coordinating those beneficiaries
with the rest of your estate.
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Documents can prove extremely costly,
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as I've already talked about and as I'll
continue to talk about in this video.
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So mistake number two is not
understanding the beneficiary pathway.
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So I want you to assume that it's
just you have not named your spouse as
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beneficiary is your spouse has either
passed away or you're divorced,
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but you have four kids and you name each
of those four kids as 25% beneficiary.
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So if you die, your,
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your money gets split four ways
across each of your children.
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Now I want you to assume, I know
we don't like to think about this,
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but I want you to assume that
one of your children passes away.
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What do you want to have happen with that
child's portion of your IRA with their
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25% do you want the other
three beneficiaries to receive
their portion or do you
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want the deceased child's portion of
those assets to pass to their children?
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So what I'm talking about here is the
difference between per stirpes and per
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capita beneficiary designations.
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There's a couple of ways you can do it.
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One way will pass to the
heirs of that deceased child.
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The other way we'll pass to the other
three remaining beneficiaries that are
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your children to take the time to
sit down with your estate attorney,
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with all of your wills, your trust,
all of your estate documents.
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Those should also include
your beneficiaries.
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So it's important to get their guidance
on based on what your intentions are
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with your assets on how you should be
completing those beneficiary forms.
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The mistake number three that I see all
the time too often is failing to update
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your beneficiaries after
four specific trigger events.
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Now there are more than this,
but these are the big four. Okay,
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so we have death, divorce, remarriage,
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and birth.
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These are the events that should really
trigger you to review and update your
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beneficiaries. Okay, so
let's start with death.
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Death is probably the most
obvious one. And so if someone,
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one of your beneficiaries, whether
it's a primary beneficiary,
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like maybe it's your spouse or if you
have a child or some other beneficiary
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that you've named, if they die,
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you're definitely gonna want to update
your beneficiaries so that you don't have
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as many issues with the problem that
I talked about in the last mistake,
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which is not understanding
the beneficiary pathway,
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especially if one of those people dies.
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Now the second one is divorce and this
is a really interesting one because a lot
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of people forget to update and
remove their spouse after a divorce.
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Like you've been married to
this person for like 25 years.
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They got divorced 30 years ago,
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but they forgot to update
their beneficiary forms.
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So they still had their last spouse
on their beneficiary form and not you.
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Okay. So it's very important
both when you get divorced,
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when you sever those ties
with the previous spouse,
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and then when you remarry to review and
update those beneficiary forms so that
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your assets don't get split in ways that
are inconsistent with what you expected
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to have happen and especially what your
existing spouse expected to have happen.
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So when someone is
born, you have children,
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you have grandchildren,
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you may have a favorite niece of
yours that you want to include as a,
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as a beneficiary. And so it's really
important to make sure that you,
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because you are naming those specific
people in your beneficiary form is super
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important that you update that when
new people enter into your life.
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And I see a lot of people make a mistake
that sort of related to this as I think
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that because our minor,
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because our child that they can't name
them as a beneficiary. No, you can,
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you just have to name someone who's
going to oversee those assets until they
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become an adult.
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So just be sure that you're keeping up
with those beneficiary changes as you
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have, um,
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children who are born or grandchildren
or other people that you wanna include
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who are special to you and you want to
give them a little something after you
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pass. Okay. So there you have it.
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The three most common mistakes
that I see easily avoidable,
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assuming your will has
you covered or worse,
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naming your estate as a beneficiary,
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not understanding the beneficiary
pathway. And then third,
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not updating your beneficiary
forms for those for trigger events,
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death, divorce, remarriage and birth.
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If you have questions about your
beneficiary forms or or, uh,
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understanding that beneficiary pathway,
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especially if you're a client of
true North, give us a call at,
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you can call us at (503) 387-6869
or if you go to our website,
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true North R h.com.
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A right there on the home page is a link
to book a call where you can schedule a
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15 minute call with me and I can
answer any questions that you have.
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Thank you so much for watching.
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My name is Ashley Mitcciche and
I will see you next week. Oh.
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And be sure to like comment
and subscribe to our channel.
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We put out new videos every single week,
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all around the theme of retirement and
exit planning to help you transition into
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the next phase of your
life prepared. All right.
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Thanks so much for watching
and I will see you next week.
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