By Angie Craig
Special to GUIDON
There is a darker side to financial planning that many of us don’t like to discuss. Our inherent nature to delay the inevitable can lead the ones we care about into financial chaos. To avoid the chaos, careful preparation needs realized when it comes to estate planning.
“Estate Planning and careful selection of valid beneficiaries prevents wealth from going to unintended beneficiaries, protects families with young children, and quite frankly, eliminates a mess when you are gone,” said Mark Dunlop, Army Community Service Survivor Outreach financial counselor.
The two most apparent ways to transfer your wealth and estate at time of death is: probate and beneficiary designations. Probate, the judicial process of proving the will as the last true statement of the deceased, can be an expensive and time-consuming process. The probate process can take a year or so to settle and the cost equals 3 percent of the estate’s value. Minimizing assets subject to probate is preferable, careful consideration of beneficiary designation and contingent beneficiary designation is essential.
A beneficiary is defined by Merriam-Webster as being “the person designated to receive the income of an estate that is subject to a trust.” The definition does not just include the singular person, but can also be persons, an organization, charity, or trust. The beneficiary designation can also include a mix of the previously listed beneficiaries.
The common assumption amongst Americans is that wealth is transferred by the will. The will only transfers probate property. Some examples of probate property are: real property, personal property (jewelry, automobiles, and art), bank accounts, interest in a business, or a life insurance policy or investments that lists the estate as beneficiary. By naming valid beneficiaries, assets become non-probate assets and the probate process can be forgone.
Common examples of non-probate assets that are transferable by beneficiary designation are: life insurance policies, annuities, pensions, IRA’s, and 401(k)’s. What’s extremely important is wise discernment in beneficiary selection. Once the selections have been made, set your calendar and do periodic evaluations. Life changes and events can influence assigning beneficiaries and it’s very possible beneficiary designation will change over time. Divorce, having children, and death are common factors in an update to designations.
Beneficiaries will not be notified of their beneficiary status or if there are updates to their status. As you can imagine surprises in this area are not going to be taken well. Planning is essential here. The planning process can be daunting to do on your own and it is recommended to reach out to a Certified Financial Planner at cfp.net, a Retirement Income Certified Professional at designationcheck.com, or an Accredited Estate Planner at www.naepc.org.
Seeking advice from a professional and setting a solid plan into place decreases frustration, time, and money spent by your beneficiary. Guidance and assistance can also be conveniently found at the Fort Leonard Wood Legal Assistance Office, 316 Missouri Avenue, Bldg. 315. Don’t let the darker side of estate planning intimidate you. The consequences of ignoring the inevitable will only lead your loved ones into financial chaos.
For more information, contact Shin-Ae Young, Financial Readiness Program manager, at 573.596.0212 or contact Fort Leonard Wood Legal Assistance at 573.596.0629.
(Editor’s note: Craig is an Army Emergency Relief Specialist at ACS.)