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How to avoid beneficiary mistakes

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Many think that a will or trust is what determines where everything goes at death, but it can be a big mistake to make this assumption. Now is the time to review clients’ and prospects’ entire financial picture. Here are a few things to remember regarding beneficiaries:

  1. A Last Will and Testament generally determines where things that are titled in your name go. Things such as real estate, cars, bank accounts, stocks and bonds are included in a will. It is important to realize some assets are owned by contract rather than title that don’t pass through your will.
  2. Financial asset contracts can be annuities, life insurance, IRAs and any other types of financial accounts. Each may have a beneficiary designation. If a will says everything goes to Cousin Susie and a client’s beneficiary designations say Uncle Ed, and all of those assets are in contract assets, it may all go to Uncle Ed. Many times beneficiary designations are never updated or changed before a death occurs.
  3. As a financial professional now is a good time to review your client’s beneficiary forms and make sure they are up-to-date. Don’t wait until life changing events occur, and don’t assume the attorney or the client took care of it. Forms cannot be changed after a death occurs. They need you to help keep their forms up-to-date. Most attorneys do a great job but often focus on what are called “probate assets” and don’t review financial contracts outside of probate.
  4. Another important issue to review is the default language on beneficiary forms. Do you know the difference between “per capita” and “per stirpes”? Mark’s grandfather David had three children: Douglas, Donald and Lois. He named them as equal beneficiaries on several annuity accounts. Unfortunately, Donald died before his father David. The account was divided two ways between Douglas and Lois when David passed away. Since the default language was per capita, divided equally among surviving heads, Donald’s children were entitled to nothing. If the words per stirpes were used, Donald’s children would have gotten Donald’s share. Talk to your clients. If this is important to them, make sure per stirpes language is added to beneficiary forms.

Come hear Nolan Baker speak at Senior Market Advisor Expo, which will be held Aug. 25-27 at Mandalay Bay in Las Vegas. Nolan can be reached at

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