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Avoid These Common Estate Planning Mistakes

November 7, 2013

Filed under: Beneficiaries,Estate Planning,Retirement Planning,Special Needs — Neel Shah @ 5:49 pm

Estate planning is a field fraught with pitfalls. All too often, estate planning mistakes are discovered after the person who created the estate plan has passed on, so he or she cannot fix the problem or explain his or her intentions. A recent article discusses several estate planning mistakes to avoid.

Naming Special Needs Minors or Adults as Beneficiaries
This is often problematic because special needs individuals often receive benefits from the government. However, most of these benefits are needs based, and may cease if the individual receives a large inheritance. Therefore, gifts to special needs individuals must be structured in a way – such as a trust – that keeps them out of the immediate control of the individual.

Failing to Name a Contingent Beneficiary
Failing to name a contingent beneficiary becomes problematic when the primary beneficiary either predeceases the person who created the estate plan, or disclaims his or her share. In either situation, if a contingent beneficiary is not named, the share would pass in accordance with the intestacy statute under state law.

Naming Your Estate As The Beneficiary on a Retirement Plan
When an individual receives the proceeds of a retirement plan after the death of the plan owner, he or she can take advantage of special IRA “stretch out” provisions. Using these provisions, the beneficiary can structure the inherited IRA to receive distributions throughout his or her life. These provisions do not apply when the beneficiary on the plan is an estate.

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