Estate Planning: Stop Procrastinating

Ed Slott & Company

Thorough planning could be the best thing you do for your heirs

Posted June 10, 2011

By Ed Slott & Company

Many people procrastinate when it comes to estate planning. The main reason for this is that estate planning involves making difficult decisions about matters most of us would rather not contemplate. Deciding how to transfer assets at death, who should raise children in the event of a premature passing, or how care will be provided if a debilitating illness sets in are some of these decisions that come to mind. The expense of having legal documents prepared is another reason individuals put off estate planning. However, it may be more expensive to do nothing, leaving a mess for your heirs. In addition, your assets may not go where you want in the absence of a clearly defined distribution path set out for them in a will, a trust or a beneficiary form.

In a recent survey by website RocketLawyer.com approximately 57% of 1,000 respondents admitted they don’t have a will. The survey also found that women lacking a will cited cost as the biggest impediment, while the main objection cited by men was a perceived lack of need.

Generally, assets that have a beneficiary form associated with them will go to the "person, place or thing" identified on the last form that is properly filed during the account owner’s lifetime. Similarly, jointly-held assets will pass to the survivor. All other assets not accounted for by a will or a trust could be dispensed via state law to someone you don’t want to receive them.

We’ve talked many times before about the necessity of having an up-to-date will and a current designated beneficiary form for your retirement assets. The reason we keep bringing this up is we can’t stress enough how important it is.

The beneficiary form for your IRA or qualified company-sponsored plan in effect becomes the will for that asset. It is vitally important that this form be properly completed. If your estate is the beneficiary of your retirement funds, either by design or default, the ability of your heirs to stretch the payments over their lifetimes will be lost, along with a potentially substantial tax-advantaged growth opportunity.

Equally important is filling out the beneficiary form with both primary and contingent beneficiaries. It’s also a good idea to review the form annually to see if any changes in your life make updates necessary. For example, you certainly would not want an ex-spouse to receive your retirement funds because you forgot to update the beneficiary form.

Please don’t procrastinate on this topic any longer. It is simply that important. Consider the financial and emotional value to be gained by consulting a competent advisor who can assist in simplifying your estate planning needs. That could be the best legacy you leave to your heirs.

Ed Slott and Company has been called "The Best" source for IRA advice by The Wall Street Journal, and "America's IRA Experts" by Mutual Funds Magazine. Ed is a widely recognized professional speaker and author. Get more IRA information from America's IRA Experts.