Help Your Clients Choose the Right Beneficiaries

beneficiaries, willFor many clients, estate plans control the two most significant assets they own: their retirement planning assets and their primary residence. But even well-drafted estate plans can fail if a client names the wrong person the beneficiary of a retirement plan, annuity, or life insurance policy.

CPAs, as the quarterbacks of the financial or estate planning team, have an important role to play in ensuring clients choose the right beneficiaries. Here is what CPAs should keep in mind when helping their clients make this crucial decision.

Ask your clients the right questions.

To ensure that your clients designate their beneficiaries in the best possible manner, be sure to ask them the right questions when performing an annual review. Who are the current beneficiaries of their assets? Why (and when) were the beneficiaries designated the way they were? Does the entire financial/estate planning team know who the beneficiaries are? Asking these questions in an annual review may make clients aware of new options. For example, a client may remember that he designated his ex-wife as the beneficiary of his life insurance in case he died before his child support obligations were fulfilled, but realizes now that his children are grown child support is no longer a factor. Or a client whose son is struggling with debt and facing creditors may see that it’s better to establish a trust for the son rather than making him the primary beneficiary of her life insurance policy.

Make sure clients’ estate plans stay up-to-date, even when their circumstances change.

Significant life events such as marriage, divorce, and remarriage, for example, require clients to update their estate planning documents. But clients sometimes fail to complete the necessary paperwork. The legal process of a divorce, for example, can be emotionally and financially devastating, and clients may not feel like tying up all the loose ends—such as revising an estate plan—right away. Clients also may forget to update their beneficiary designations if they change advisers midway through making an estate plan.

Show clients how their choice of beneficiary affects their entire estate plan.

Many clients designate their beneficiaries in isolation, without thinking through the effect that decision will have on their entire estate plan. This decision can lead to serious federal or state estate tax consequences. Estate plans can founder if clients’ non-probate assets (those that pass by ownership or law or by contract designation beneficiary) aren’t properly coordinated with their probate assets (those that are in the decedent’s name alone and will pass through the probate estate, either by will or by the laws of intestacy if the client does not have a will). CPAs can help by showing clients how their beneficiary choices affect the whole plan, and encouraging them not to view the designation of beneficiary as a stand-alone decision.

Inform clients of the financial implications of the beneficiaries they have chosen.

Clients sometimes don’t fully understand the implications of how they designate assets to beneficiaries. For example, a client may name his minor children as beneficiaries of an IRA or retirement planning asset without realizing that the children will be able to use the funds however they wish when they turn 18 or 21 (depending on what state they live in). In the case of a significant asset, the client may be better off establishing a trust that will control the asset until the children are older than that. Or a client may name a trust she established as the primary beneficiary of a retirement planning asset, without understanding that stretching out the benefits over the lifetime of a trust is generally not permitted except in the case of a special trust known as a “see-through trust.” Advisers must consider all these implications and be sure their clients understand them.

Pay special attention to tax apportionments.

CPAs should also review the tax apportionment language in a will to determine how any federal and/or estate taxes that are assessed will be allocated among the assets. If this is not done carefully (and the plan reviewed on a continuous basis) beneficiaries under the will can be inadvertently disinherited. Specifically, if a will provides that all taxes are to be paid from the residue of the estate and not apportioned among the beneficiaries who receive the assets under the will, then beneficiaries who receive significant specific bequests could receive those assets free of any federal or state estate tax, while beneficiaries who receive their inheritance out of the residual estate will have their bequests reduced by the payment of all the federal and state estate taxes, not just the taxes attributable to their share. Likewise, should a client change the designation of a beneficiary later in a way that is inconsistent with the will—for example, by naming one child the beneficiary of the IRA and all other children the beneficiaries of his will—the consequences to the other children who take under the will can be disastrous.

As part of your review of your clients’ financial picture, you, as CPA, are in a strong position to look out for complications that arise when the right beneficiaries aren’t selected, and to advise your clients appropriately to ensure they have a current, coordinated, and integrated estate plan.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at To download Annino’s FREE eBook, Estate Planning 101 visit,

Your New Year’s Resolution: Is your estate planning in better shape than Stieg Larsson’s?

Now is the time of year that we all make our New Year’s resolutions. At first, we tackle our resolutions with gusto. We chug along for a month or so, and then we never look at our list again. But let’s make this year different. Make this the year that you, your family, and your clients resolve to get your affairs in order.

Unlike my previous columns, this one is also expressly directed to you –  the reader – as it is my experience that when the advisors have their affairs in order, they are more likely to ensure that their clients do too.

If you don’t, however, you certainly aren’t alone. You will be in the company of Jimi Hendrix, Bob Marley, Sonny Bono, Stieg Larsson, Pablo Picasso and Abraham Lincoln.

All of them died without a will. The court fight over Jimi Hendrix’s assets lasted 30 years. Bob Marley was diagnosed with cancer eight months before his death and still did not do a will. Sonny Bono died suddenly in a ski accident without a will in place. His ex-wife Cher filed claims, and a “love child” appeared looking for a share of his estate.

When Stieg Larsson, author of the currently popular “The Girl With The Dragon Tattoo,” died suddenly of a heart attack without having a will, his lifelong partner of 32 years received nothing; Swedish law divided his intestate estate between his father and his brother.

The moral of the story is that if you do not have a will, the law in the state in which you are domiciled has written one for you, and the default law is probably not the one that you want – especially if you are in a non-traditional relationship, have children from different marriages, have creditor claims, family conflict, charitable intentions, or a business.

January is the time of year to resolve to take the following actions:

  1. Gather all of your personal and financial information together. Look at it, sit down with your spouse/significant other and review it. Is it all in order? Are all your beneficiaries (primary and secondary) up to date? Are your assets titled properly (individual name, joint, in trust)? Do you have copies of all your important documents and passwords and do you each know how to access them? What if something happens to both of you. Who else has that knowledge?
  2. Review all your insurance coverage. Is all your insurance up to date and in the right dollar amounts? Review life insurance, disability insurance, long term care insurance, property and casualty insurance, and umbrella coverage.
  3. Make sure every member of your family – you, your partner/spouse, your children, and your parents – have up-to-date health care proxies and durable powers of attorney.
  4. If homestead protection is available in your state, make sure that you have made the proper filings to protect your family home from creditors.
  5. Review your estate planning documents in light of the recent changes in the tax law. Review the documents not just from a technical point of view but also from an operational point of view. If you died today what would flow into which trust, who would receive what, what would be the tax consequences, what is the authority to make distributions, who is in charge?
  6. Prepare an income and asset analysis. If you became disabled or died today how would your family be provided for? Is it sufficient? If your spouse/partner died or became disabled today how would you be provided for? Is it sufficient? If both of you died or became disabled today how would those you are supporting be provided for? Is it sufficient?
  7. Review your fiduciary choices. Who have you named as your health care agent, attorney in fact under a durable power of attorney and guardian of minor children? In your durable power of attorney you have the ability to nominate who should serve if you become disabled or incapacitated- have you done that? Who is named in your Will as your Executor or Personal Representative? Who is named as the Trustee of any Trust you have established? Look at your back-up choices. Are your selections still the right ones?
  8. Consider writing a side letter to those who will handle your affairs that expresses thoughts that you may not wish to express now while you are alive, but that would be important for someone to know later. These thoughts could include special mental health issues for family members, thoughts about an in-law, or confidential information about certain assets.
  9. Make an updated list of all your advisors, including their updated contact information.
  10. Review the prior nine steps and make sure that you have truly accomplished them.  Then encourage your clients to do the same.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently announced the release of an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  Annino’s book is an exhortation, resource and trusted companion for women in all facets of life.  To purchase the book visit: or for more about Annino, visit: