Who can you trust? Deb hears this question over and over again in her professional practice as an elder law attorney and a fee-only, holistic financial planner. Let Deb teach you how to protect yourself and your assets from those who might not have your best interests at heart. [Editor's note: Deb no longer contributes to Silver Planet, but we have made her archived blog entries available as a service to our readers.]
Please don’t do this to your children! I got a call just this week that shows the pitfalls of this approach. Here’s the scenario: Dad died, leaving five adult children. When I drafted his will, he stated that he wanted to benefit all his children equally, so his will reflected that. His life insurance policies had all five children as beneficiaries. But his annuity policy only listed child #3 as the beneficiary.
The law is clear: child #3 gets it all. But was that really Dad’s intent, or did he just forget to review and revise that particular beneficiary designation? What are the other children to think?
Child #3 asked if he could split the annuity proceeds five ways anyway. Of course he could, but legally, that would be a gift from him to his siblings. I reviewed the income tax and gift tax implications of his proposal. I also asked some rather intrusive questions about his creditor exposure. Current or impending lawsuits, divorce actions, eligibility for Medicaid or other needs-based government programs—lots of parties out there could view his generosity as a fraudulent creditor avoidance tactic. Child #3 had no idea that his noble idea could be fraught with so many perils.
So the better approach is this: clarify your wishes, and act on them right away. Review your will, trust, and beneficiary designations for insurance policies, IRAs, payable-on-death accounts, and any other property that you own. Revise as necessary. No ambiguities, no hard feelings, no complications. You’ll be doing your children a favor.
By Deborah Hoskins, JD, CFP
The Wise and the Wary Blog