Don’t Neglect Beneficiary Designations

Man stresses over his bill while his wife and child stand in the background.

Dear Clients, Colleagues and Friends,

Our office is working with a client who has worked with her hands all her life. Her last parent died recently after expressing the desire to leave her entire estate, in the high six figures, to our client. The other two children, a wealthy sibling and one with an addiction, were to get significantly less. Mom went to her estate-planning lawyer of many years and changed her trust, and  the lawyer, as most do, gave mom a generic set of trust-funding instructions and advised her that funding the trust was her responsibility. Some of the assets ended up in the trust, but a significant retirement account didn’t. It passed according to an old beneficiary designation, and Mom’s wishes were not fulfilled – a $100,000 mistake.

The trust “funding” process involves drafting, signing and recording deeds of your real estate into your trust, assigning any business interests to the trustee, and changing the beneficiary designations on your retirement accounts, insurance policies, and brokerage accounts. Most lawyers won’t get involved in this because they don’t have the paralegals or systems to do it efficiently and cost-effectively. We do. Financial advisors are often willing to do this work, but not all advisors have the experience to do it correctly. More frequently, clients simply don’t have an advisor whom they trust to manage their entire portfolio, so assets fall through the cracks. It makes no sense to spend thousands of dollars on a folder full of legal documents and then leave your trust empty – or worse, fail to discover that one of your biggest assets is going to an ex-spouse or someone else you didn’t expect, because you neglected to update the beneficiary designation, or did it wrong, or the bank didn’t process it correctly. This is not the time to be penny-wise and pound-foolish.

If you have a good reason to do a trust – for example, young or disabled children or grandchildren, beneficiaries with addictions or financial difficulties, children in unstable marriages, businesses that need a succession plan, a second marriage, or a significantly younger or healthier spouse who isn’t used to managing money – you need to make sure your assets are actually in the trust! YOUR BIGGEST ASSETS – YOUR HOME, YOUR LIFE INSURANCE, AND YOUR RETIREMENT ACCOUNTS – WILL NOT PASS TO YOUR HEIRS THROUGH YOUR TRUST UNLESS YOU TAKE AFFIRMATIVE STEPS TO PUT THEM INTO THE TRUST. Yes, retirement accounts can, and often should, be left in trust – though most general practitioner lawyers don’t know how to do this, and there is a common myth that they can’t or shouldn’t be.

If you are not sure whether your trust has been properly funded, call our office at 603-554-8464 for a consultation today.


  Best Regards,