One Wrong Word in Estate Planning Could Leave Family Member(s) Destitute: Why You Want to Coordinate with Your Attorney On Everything
As estate planning attorneys, one of the most common – but also dangerous – errors that we see people make involves beneficiary designations. Not necessarily understanding how inheritance works and the fact that accounts governed by these designations are separate from assets governed by a will, as well as how the law governs them (for example, who can inherit at what age, etc.), can have devastating consequences for your family after you or your spouse passes away.
And yet, this is just one of the many examples where one or two words can make all the difference in the world when it comes to estate planning. This is one reason why you want to view estate planning as an overall ‘whole’ with many pieces instead of just a will that governs major assets, such as your home, because if you do, you are more likely to consult with your estate planning attorney on that whole and coordinate everything rather than ending up with incongruent pieces that conflict with each other and fail to leave your loved ones with the support you intended them to have.
Mistakes Made On Beneficiary Forms
For example, let’s say that one father starts a life insurance policy in 2012 and names his two twin daughters (both age two at the time) as the beneficiaries. As a result, when he unexpectedly passes away from a cancer three months after his diagnosis in 2020, and he and his wife only consulted with their attorney on their will, his daughters are not old enough to have access to the life insurance policy proceeds because they are only 10 years old at the time. As a result, his wife and daughters do not have the funds to keep their home, and have trouble financially supporting themselves.
When it comes to setting up beneficiaries for retirement accounts, life insurance policies, and everything else governed by beneficiary designations, this is one reason why many list their spouse as their primary beneficiary. Children, on the other hand, are often listed as contingent beneficiaries. However, you don’t necessarily realize this unless you speak with an attorney who practices locally in this area, which results in many people failing to strategically pass on important assets, such as their 401(k), life insurance, IRAs, etc.
“Per Capita” Versus “Per Stirpes”
Another example is the per capita versus per stirpes issue: These terms describe how your property is left to your beneficiaries, and which one you select is key. “Per capita” is the default option most retirement savers have in place, where, if your primary beneficiary dies before you do, the account is shared equally among the remaining beneficiaries, but can only pass to these named beneficiaries, which means that if you forget to name a contingent beneficiary, chances are your assets will go through probate and the courts will decide who inherits. Conversely, per stirpes means that if the primary beneficiary dies first, their share passes onto their descendants (i.e. those descendants essentially act as representatives even if they are not named as contingent beneficiaries).
Estate Planning Is the Act of Coordinating Many Pieces, Not Just Writing a Will
While planning for your death – or even broaching the topic – may feel uncomfortable and even a little morbid, the alternative can be almost unthinkable. One wrong move when it comes to your assets and accounts can send them to the wrong person, or even cut one of your loved ones completely out of inheritance, which is problematic to say the least. Thus, while it might seem strange, for example, to coordinate with an attorney when it comes to setting up your 401(k), or your life insurance policy, etc., and you might assume that no one else does this, failing to do so can result in circumstances like the one above, where a father inadvertently not realizing that children cannot inherit certain funds before a particular age ends up leaving his family destitute.
Contact Our Florida Estate Planning Attorneys to Avoid These Mistakes & Pass Your Inheritance onto Your Loved Ones
There are going to be instances in life where there simply isn’t time to do things over and make changes to all of your accounts, which is why it makes sense to simply set them up the right way by working with an experienced estate planning attorney from the outset. Contact our experienced Orlando estate planning attorneys at the office of Gierach and Gierach, P.A. today to find out how we can help ensure that your inheritance goals are met with what you have in place and/or discuss any plans or changes you need to make sooner rather than later. We have helped countless families in Orlando and surrounding areas ensure that they are prepared for the future, no matter what happens.