Elder Law Update – At Large Edition July 2009
1. Keeping Your Beneficiary Designations Current. According to Consumer Reports “Money Adviser,” it is very important to keep your beneficiary designations up-to-date on your financial accounts. By doing so, you will make sure your life savings doesn’t end up in the wrong hands, like and ex-spouse or estranged sibling or distributed under court supervision. Do’s and Don’ts of Beneficiary Designation Forms according to Consumer Reports:
- Don’t leave beneficiary forms blank or name your estate. If you do your account will be included in your probate estate and distributed per the instructions of your will. If you do not have a will then the court will decide who gets your money and this requires probate in court.
- Do list a primary and a contingent beneficiary. By listing a contingent beneficiary you are covered if the primary beneficiary dies before you do. It is often suggested that you name your spouse as the primary beneficiary and then a contingent beneficiary which can be a person or trust. Be careful naming a trust or you can blow certain tax benefits.
- Don’t name a minor as a beneficiary. Until they reach the age of 18 children cannot open up bank accounts or invest an inheritance they might receive by themselves and will need a guardian or custodian to control funds. A better approach would be to name a trust as beneficiary for the minor children. With a trust you can stipulate an age at which the children will receive their money. You can also delay distribution to Junior longer.
- Do review you choices on older accounts and policies. It is important that you contact your broker, insurance agent or bank and ask who is listed on your accounts as beneficiaries, especially since some companies have gone under or have been acquired by others. When this happens, occasionally beneficiary documents are shredded or lost in transition. If you need to re-do or update the beneficiary designation forms you might be able to obtain new ones from the company’s website or you can call and request them. Your estate planner also might be able to obtain them for you. (Keep a copy for your own records!)
- Think it over. It might not be necessary for you to purchase a pre-paid burial plans in-most cases. Instead you could deposit money into a separate interest bearing account at the local bank and on your death the named beneficiary could use the money to pay for your funeral expenses. Just make sure you choose a beneficiary that can be trusted.
- Bring a magnifying glass. Make sure you read the fine print carefully and make sure you know what is covered. If there are uncovered expenses, like flowers, clergy honoraria, death certificates, etc. make a list and inform your survivors so they know what still has to be paid.
- Ask about refunds. Be certain the contract can be transferred to another funeral home or that your money can be refunded to you if you move or change your mind. You might also want to find out if there is a penalty for canceling the policy or missing a payment.
- Follow the money. Know where the money is being invested. If it is being used to purchase an insurance policy, make sure the insurance company is highly rated, if the payments are going to go to a trust account, find out the bank or institution that will be holding the funds.
- Plan for change. Find out what happens if your circumstances change. What if something you requested is no longer available? What if the funeral home changes ownership? What if your family decides on a simpler, less expensive funeral?
- Review your finances. If you are trying to qualify for Medicaid you can put some of your money into an “irrevocable” pre-need funeral plan as a way of spending down your assets.
- Talk to an elder law attorney. This is the most important. Have your elder law attorney review any pre-need contract before you sign.