(More) Complete Estate Planning

Mark Rubin

Four years ago I wrote Complete Estate Planning. I focused on some of what needs to be done, over and above having a lawyer prepare a fancy-dancy set of documents. Now, I’m back with fresh thoughts on the nuts and bolts of truly planning for what happens when you’re gone.

We learn from our experiences and our errors. The past can help us avoid bad outcomes.

Older people often have annuities or life insurance. These products can serve useful purposes although, in too many cases, annuities purchased later in life offer more benefits for the selling agent than the purchaser. That issue aside, we see plenty of situations in which the policy owner wants to change the identified beneficiary.

Beneficiaries die. We fall in and out of love. And life happens. Reasons aside, nothing remains static forever.

But annuities and insurance policies are contracts. The fine print matters. And the fine print says, generally, that the company decides all issues about the validity of beneficiary designation changes.

Import? You want to leave your life insurance benefit to Aunt Ida, and not to Uncle Henry. Make the change as soon as possible. Follow up with the insurer concerning the instructions. Don’t expect deathbed changes to occur.

By the way, use the insurer’s form. Even a version with the same words, printed differently, may fail to accomplish your goal. And follow the insurer’s rules. Send the document to the right address. Sign per instructions. Etc. (Insurer’s don’t want to end up in probate-like disputes. Establishing consistent policies and following them furthers that goal.)

Then there are POD (bank account) and TOD (investment account) designations. In both instances an account owner identifies one or more persons who own the account at (D)eath. Again, these are contractual relationships. Fine print rules.

POD and TOD designations rock. Along with beneficiary deeds for dealing easily with real estate, they provide a convenient means for avoiding probate when you don’t have a trust.

Unfortunately, designation forms get complicated. As completed—often by low paid, poorly trained employees—they can create ambiguities which, generally, no one notices until you’re gone and not able to explain anything.

A further complication? The law—at least in Arizona—offers immunity for institutions which pay based on their interpretation of the beneficiary designation, unless someone objects in writing before the institution pays. So, you can think you are leaving one account to a friend and, in fact, leave your entire estate to him. And if your children don’t know where you bank and the money gets distributed, they have no effective remedy.

We like devices which make passing assets easier and less expensive. Know, though, that what seem like “just forms” matter greatly. Pay attention, ask questions, and don’t let your insurance agent or your banker function as a legal advisor. This stuff matters!