Saturday, October 23, 2021

When Life Changes, So Should Your Beneficiaries



Ask The CFP® Practitioner

Darcie Guerin

“Don’t let the possibilities be suffocated by procrastination. Go! Now!” ~ Robert H. Schuller, American Author (1926-2015)

Question: My neighbor’s husband recently passed away and from what she’s told me it appears that things didn’t unfold as she thought they would. He told her she’d be “okay” and that’s not the case. How often do you suggest reviewing financial and estate plans with family members?

Answer: If there’s a plan in place, reviewing the documents and beneficiary designations once a year and after every major life change is recommended. Not knowing your neighbor’s circumstances, I can only say that these problems generally occur when external situations change, or when former spouses or deceased family members are still named as beneficiaries. More often than not this is unintentional and happens because the account owner fails to update beneficiaries. One of the most extreme examples I’ve seen was the ex-wife who inherited everything, leaving the widow completely out of the picture much to her surprise. Her deceased husband never updated his beneficiaries so the old insurance policies and retirement assets were left to an ex-wife. A nice windfall for her, but devastating for his widow.

According to the National Institute of Health there are forty-one major life changes. A few from the top ten that may signal the need for a review are the death of a spouse, divorce, death of a close family member, personal injury or illness, and retirement.

Recently we began working with a widow. They were married for thirty-two years and it was a second marriage for both. As he grew sicker they moved closer to her son so she’d have support and help. His widow was shocked when the time came to review the documents and distribute assets. Her husband always told her not to worry, that she’d be all right. Although that was likely the case sixteen years ago when their estate planning documents had been created, their financial situation had changed dramatically during that time.

Over those sixteen years family dynamics, real estate values, stock prices and the charities they cared about had changed. While his IRA account grew in value, representing the bulk of the estate, the Florida home lost value and has not yet recovered. Because the home sat empty during his illness it now may be more of a challenge to sell, which is what they’d planned on doing to provide for her future. Current cash flow is a problem because the widow’s portion of the estate is tied up in the lower valued property.

According to the outdated documents, his IRA is to be split between his two estranged children and the home will go to his wife. To add insult to injury, his trust also specified that a large dollar amount from the proceeds of the sale of the home (not a percentage) is to go to a church the couple hadn’t attended in years. The house value was down, the IRA was up, and not surprisingly, the entire situation led to resentments and financial insecurity for the surviving spouse. No one will ever know for sure, but it’s likely that if his documents had been reviewed, discussed and updated regularly that his wishes may have been better carried out.

Be Proactive 

We schedule annual physicals and semi-annual dental visits, why not schedule an annual financial check-up? Although it may seem unnecessary or repetitive, make an appointment with yourself and your team of financial professionals at least once each year, and always when there is a change in your family. This will help to ensure that all aspects of your life reflect your current intentions.

If you’re still not ready to take action and don’t believe that the lack of estate plan, or an outdated one, leaves you and your family vulnerable, ask yourself what could happen if you became incapacitated for any period of time. Would there be bickering over your medical treatment or are your wishes in writing; who would handle your financial affairs until you’re able to do so again; do you have business interests that require attention? Addressing these three fundamentals may help:

  • A will that includes a list of personal property and who will inherit.
  • A durable power of attorney to make financial decisions in the event of your incapacity. You can designate joint power of attorney if you think more than one person is needed to handle your affairs.
  • An advance healthcare directive.

Still procrastinating? You’re not alone. According to the website Rocket Lawyer, nearly 64% of U.S. adults don’t even have a will, including 51% of people age fifty-five to sixty-four. If you’d like a beneficiary review worksheet to help you get started please contact our office. Your family and your legacy are important; take time to protect them to the best of your abilities. Stay focused and plan accordingly.

This information is general in nature and is not a recommendation of any particular strategy. The opinions expressed are those of the writer, but not necessarily those of Raymond James and Associates, and subject to change at any time. Always consult with financial, legal, estate and tax planning professionals before taking any action regarding this planning. 

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.” 

This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James and Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email Website: 

Leave a Reply

Your email address will not be published. Required fields are marked *