Smart planning for beneficiaries

By Lisa Butler, Director of Client Services | Guest Column for the Nashville Business Journal

LisaFor most people, naming beneficiaries can be an emotional process. After all, you are making plans for a time when you will no longer be around, and you want to ensure that the people whom you care about most will be well taken care of in your absence. Thus, it’s critical that you not only have a solid estate plan in place, but also that you communicate how things will unfold when the time arrives for your beneficiaries to receive their inheritance.

Designated Point of Contact

While estate planning and naming beneficiaries may feel like a private matter, it is important that all of your plans are made clear to a specific individual or select group of professionals who can take an immediate leadership role in managing your estate.

Because most beneficiaries are often family or friends, it is a common mistake to assume that things will go smoothly once you are gone. Communicating your directives and assigning responsibility to a trusted confidant will help avoid any misinterpretation of your intention, and will take pressure off of the family. Choosing a confidant should be an objective decision which is why many people choose a combination of both an individual and a professional advisor.

Investment-Beneficiary Nuances

A beneficiary can be named through a very broad range of investment vehicles which include life insurance policies, individual retirement accounts (IRAs) and annuities. In each case, it is incumbent on the individual to identify the beneficiary based on the criteria of the particular investment. Keep in mind that while your intention in naming a beneficiary may be very clear at the time that you make the designation, subtle nuances in the language can cause difficulty in discerning the intent and recipient of the benefit. As a precaution, it is highly recommended that you utilize the expertise of an advisor to make certain that all the details have been addressed as they relate to each investment/beneficiary.

Coordinated Planning

Another important planning step is to coordinate your beneficiary designations with all other estate planning documents. Failing to take this step can cause conflicting interpretations of how benefits should be dispersed, creating tension in what is already an emotionally charged environment for family and friends. Avoiding this situation requires open lines of communication between all of the professionals managing your estate which will probably include attorneys, financial advisors, and CPAs. Coordinating the efforts and responsibilities of these professionals early in the planning process will help facilitate a clearly defined disbursement once the time arrives.

As an example of the importance of coordinating your estate planning, consider that in most scenarios a beneficiary designation will supersede the language in a last will and testament. That can be a very challenging and potentially confusing situation for individuals and families. Proactive planning, communication and attention to detail can help avert this problem, and allow your estate plan to be implemented as you intended.

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