Estate planning can be complicated, and it’s not uncommon for people to make mistakes with their plans. But financial advisors make errors, too, so we asked several advisors to identify the most common mistakes they encounter from other financial planners.
1. Improper beneficiary designations
We frequently see advisors improperly completing beneficiary designations. Examples: not changing the beneficiary due to divorce or a death, or listing a special needs child or grandchild directly as a beneficiary, rather than a trust FBO (for benefit of), thereby affecting their eligibility for Social Security disability benefits.
— Kevin Reardon, CFP; Shakespeare Wealth Management, Inc., Pewaukee, Wis.
2. Not changing asset titles to trusts
Incorporating revocable living trusts into a client’s estate plan but forgetting to update all the account titling to the name of the trust. Not changing titles creates problems that include having to pay additional probate costs, losing the private nature of settling the estate, etc.
— Richard Durso, CFP, AEP; RTD Financial Advisors, Inc., Philadelphia
3. Incorrectly assuming clients’ goals
Many advisors assume a client’s main goal is to save estate taxes, for example. However, when really connecting with a client, we might find that taxes are only a small aspect of their objectives. Sometimes, in listening to the client, we realize that their fears are more about their heirs’ ability to manage the inheritance as well as decisions such as trustees, etc.
— Richard J. Busillo, CFP, AIF, RPA; RTD Financial Advisors, Inc., Philadelphia
4. Naming minor children as account beneficiaries
Letting clients name minor children outright as primary or contingent beneficiaries of life insurance or retirement plans. When minor children inherit, a court must appoint a guardian who must be bonded and must file a laborious annual accounting with the local court.
— Helen Modly, CFP, ChFC, CPWA; Focus Wealth Management, Ltd., Middleburg, Va.