October 24, 2023

Beneficiaries

26 minutes

“For every minute spent organizing, an hour is earned.” - Anonymous

You’re organized, right? You made an estate plan…set-up guardians for your kids, named beneficiaries in your will. Everything will go as smooth as butter should you meet your ultimate demise, yes?

Maybe, but maybe not. The best way to ensure everything goes according to your plans is to get organized. Creating an assets and liabilities spreadsheet, while tedious, will help you and your loved ones navigate your financial wishes in the event of your incapacitation or death.

How will a spreadsheet make the process easier? Let’s use a real client example to highlight the use case:

I have a client, we’ll call her Amanda, that I’ve been working with for years. Amanda’s mother passed away two years ago, not unexpectedly. She had two children, Amanda and her brother and had remarried and acquired three step-children. She worked her entire life, leaving behind some assets in trust and a will to assign her retirement accounts and two businesses to her beneficiaries.

While it may seem as though Amanda’s mother had her plan carefully arranged, it turns out that asset allocations were a lot trickier than anticipated. The plan was to give her retirement account, valued at $1 million to Amanda and her brother to split. The two businesses were valued at $500k each. $100k was set to be given to each step-child from that while the other $700k was to go to her widowed husband. Unfortunately, the businesses were not worth $500k each, making the distribution of funds a nightmare for her survivors. Had the assets been accounted for prior to her death, the plan could have been reevaluated without the tremendous effort and headache left for Amanda to deal with upon her passing.

What can you learn from Amanda’s story? First, take the time to create an asset and liability spreadsheet to include all of your accounts and where they are held.

👉 Here's a handy template to get you started!

Next, use that spreadsheet to review all your beneficiary forms for each account. Why is this important? The Wall Street Journal recently published an article explaining how different states have different rules for beneficiaries. For instance, if you name your eldest child the beneficiary of your 401(k), but then get married, the beneficiary automatically changes to your spouse, even if you later divorce that person. How do you keep it all straight? Via an asset and liability spreadsheet review completed yearly.

It may take you thirty minutes to prepare an itemized list of all your accounts and beneficiaries but it will save you and your loved ones hours of trying to organize everything in the event of an emergency or death.

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By Mike Morton, CFP®, RLP®, ChFC®

4.8

2121 ratings