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What is the simplest mistake you can make to cause major harm to your intended estate plan – and to the people you wish to provide for through that plan?  
It is having outdated (or missing entirely) beneficiary designation forms for your IRAs, employer-provided retirement savings plans, life insurance policies and other valuable financial accounts.
Happily, though, this is also the easiest of mistakes of fix – and now is the opportune time of year to do it. Right now, you should be receiving 1099s and other reporting forms from all your retirement savings and financial accounts to use in preparing your tax return. As these forms come in, check to see that for each form issued, you have an up-to-date beneficiary designation form in place. As you do, you may be startled to find how many designations have been too long neglected or even lost outright. The cost of these mistakes can be steep.
Consider these possible cases with an IRA: 
1) Your estate is your beneficiary. Perhaps you named your estate as beneficiary long ago when you were young, single, and just starting to contribute to the IRA.  But now you have a family and the IRA holds a substantial sum. Problems:
  • The possibility of “stretch” IRAs for your heirs is forfeited. An individual named as a beneficiary can receive distributions from an IRA. stretching over his or her full lifetime, earning decades of tax-favored investment returns in the IRA. But this isn’t possible when an estate is the beneficiary. In this case, if the IRA owner dies before reaching the beginning date for taking required minimum distributions (RMDs) (April 1 of the year after reaching age 70½), then the IRA must be distributed in only five years. If the owner dies on or after the beginning date, then the IRA must be distributed over the owner’s remaining life expectancy under the IRS’s “Single Life Expectancy Table” as of the date of death. Either way, the opportunity for many years of tax-favored investment returns is lost.
  • ​The IRA funds must pass through probate. This process can be much slower and more costly than having funds pass directly to designated beneficiaries. Probate also is a matter of public record and the IRA funds become available to creditors.
2) You have no named beneficiary. Perhaps your beneficiary form is lost. This happens. Your IRA administrator will determine your beneficiary according to the plan’s “default” terms. The result may be very different from your desires.
3) Your situation has changed since you named your beneficiaries. Perhaps you have married or divorced, had children, or the situations and financial needs of family members have changed greatly. Your old beneficiary designations likely will produce results you wouldn’t desire now. Your will cannot fix this, because IRA beneficiary designations prevail over the terms of a will. If you have divorced and remarried but your first spouse is still named as your IRA beneficiary when you die, your will won’t remedy that.
The same principles apply to beneficiary forms for employer-provided retirement plans, insurance policies, and other financial accounts. Obsolete and missing beneficiary forms can cause great harm.
Here are common beneficiary form mistakes to avoid, for all kinds of accounts:
  • Not naming a contingent beneficiary, in case the primary beneficiary dies or for some reason is unavailable.
  • Directly naming minor children as beneficiaries, without a trust or custodial arrangement as required under state law.
  • Naming a special needs individual as beneficiary with insufficient planning. This may cost government benefits, and also require a trust arrangement.
  • Naming a college age or other potential “spendthrift” beneficiary, without controls to prevent squandering of funds.
  • Not using payable on death (POD) or transfer on death (TOD) options for financial products to transfer them directly to beneficiaries and keep assets out of probate.
  • Failing to integrate with your will. Beneficiary designations should be complimentary to bequests by will in an overall estate plan.
Fix Defective Beneficiary Forms
Fortunately, it is extremely easy to fix defective beneficiary forms. If you suspect a form might be obsolete, there is no need even to take the trouble of obtaining it to examine. Just file a new form. 
To assure that there won’t be any problems with this new form:
  • Obtain a receipt from the institution with which you filed the form, to be sure it was properly received.
  • Ask for an acknowledged copy of the filed form from the institution, in case it loses the original you filed with it.
Then tell your attorney, executor or financial advisor about the location of, and choices on, all your beneficiary forms, so they all can be obtained whenever needed and integrated together into the best possible overall estate plan.