Money Puzzle Podcast: How often should I review my beneficiaries?

Eric Douglas |

This week on The Money Puzzle Podcast Brian Ramsey and Eric Douglas talk about the importance of beneficiary designations and keeping beneficiaries updated. Making sure that these instructions are in place and frequently reviewed. Things change so you need to ensure everything still fits in your current situation.


Speaker 1 All right. Welcome to this week’s version of The Money Puzzle. I’m the same guy that I was last week, and that’s the same guys we were last week. We did not wear the same thing two weeks in a row, although I do wear this a lot.

Speaker 2 But I’m the same guy I was about ten months ago.

Speaker 1 Yeah, yeah, yeah. Exactly. Because we did record last week’s show about 10 minutes ago, so we do them multiple at a time anyway. All right. So today’s topic is again, just like last week and just like almost every week where we sit down on a weekly basis and say, okay, what, what what topics are we hearing from either clients or prospective clients? And we sort of take those topics kind of round robin around in the room on Monday mornings and we say, okay, we come up with some topics. So last week we didn’t get to get to you get a chance to date is Friday afternoon make sure you go back and check that out. We talked about just seeking advice from nonprofessionals and how that can be disastrous in some cases, but not always in your best interest. This week we’re talking about not necessarily about estate planning, but sort of beneficiary designations and the importance of making sure you check that. And I will tell you what the stories we’re going to tell are all stories that are coming from meetings that we’ve had over the last several weeks with clients that unfortunately either passed away or have had parents that have passed away or something’s happened where a beneficiary came into play. That is why we set out years and years and years and years ago when we created the client experience. We have a dedicated meeting every single year to talk about beneficiaries. It is a specific meeting on the calendar. Every client knows about it. And we’re going to talk about beneficiaries. I’m not once and I’ve been doing this for a long, long time, especially having these specific meetings. I’ve not once had any client ever say to me, Why do you do this? Most of the time they go, I appreciate you doing this because there is a change for some, you know, whatever reason. So anyway, that’s what we’re going to talk about today. We are going to sort of round robin this between the two of us, and we’re going to go back and forth and tell some stories. But we hope that you guys see something in these stories that say, okay, I know someone that needs to hear this or maybe we need there. So maybe me and my spouse need to sit and talk about this. Or maybe we need to spend the weekend or the week going through our beneficiaries to make sure that they’re accurate. So that’s what we hope you get out of it. But anyway, some of these stories may resonate that may be in your situation or, you know, somebody. And that’s that’s why we do this show.

Speaker 2 So for me to go first. Yeah, I’ll go first. So I have two stories specifically, but I’ll start with with one and send it back to you. So, so my two stories are really going to be centered around consolidation, consolidation of accounts, and making your estate far more simple prior to you passing away, obviously. So the first case I’ve got a client who unfortunately is is in a memory care facility with dementia. It’s not even so much early onset at this point. And so my relationship really at this point is with the power of attorney, it’s not even with him so much anymore. He so he’s in a memory care facility. His wife, he never really shared with his wife what types of accounts they had, how much she had, no clue how much money. It was actually kind of interesting to be part of the conversation when she found out how much money she was actually worth. And that was a very interesting conversation. It was kind of a very eye opening for her because she just always kind of had everything and everything was there. But she really never knew any of the nuts and bolts behind everything that that they had. But in essence, this individual client, he was a Dwyer for the vast majority of us all really pretty much the entirety of his life until the very end when he started realizing, okay, I need some help. I’m starting to go a little bit. And so he had a Lloyd’s of London account overseas. He’s got gold coins. He’s got silver coins. He’s got a different other coin collection. He’s got real estate. He’s got all types of different accounts. He’s got, I think, five or six insurance policies. There is stuff everywhere. Okay. And unfortunately, the position that we’re in right now is because he’s no longer able to do any of this himself. Everything has fallen on his play, his power of attorney, to unwind everything that he spent a lifetime putting together in all of these different places. And so I’ve got most of the investment accounts at this point. But we had a irrevocable trust. We had individual accounts, we had retirement accounts. We had all types of different accounts for both he and his wife as well, plus some other family money and some money that’s already put putting in a trust. And so understanding the purpose of they had three different trusts, then irrevocable, and then they each had a living trust for each one of them. And there’s also a trust that owns the real estate as well. And there’s also a life insurance trust. So his estate plan was. Basically a patchwork of things that he had put together. And he is he’s the kind of guy he would read an article about a stock and know I’m going to go buy some of that. So we had stock accounts with literally 150, 200 different stocks or holdings within an individual account. No rhyme or reason to any of it. Right. And so, once again, going back to the idea of consolidation and just making things far more simple. Most of what he was doing really wasn’t of benefit to his overall portfolio or it wasn’t any more beneficial than just the traditional types of investments would have been. But he you know, I don’t know if it was I don’t I don’t want to say vanity, but sometimes there is a prevailing thought that people might have that the more complicated something is, the better an investment it is. And 99 times out of 100, that’s just not the case. It’s really, really not. And so we were stuck. And this has been a long process and we’re still undergoing it, unwinding all these other different things that he’s done and trying to make sure that everything gets done before he passes away. Because once he passes away, we’re going to have some other tax consequences. Things are going to kicked in to the trust and it’s going to lead to a whole other host of events or a whole other sequence of events that’s going to occur upon his passing. And we are a little bit on the clock now because once again, he’s he’s in a facility and he still probably can hang on for another couple of years, but we don’t know that for a fact. And so that’s kind of where we’re at right now. So consolidation and simplicity is far more valuable within an estate plan than than really we can even talk about here. It’s it’s so, so valuable.

Speaker 1 Yeah. Yes. I’ll give you another one. So we had a client. Who is Kleinman? Who? His father passed away. Hey, that’s one of our clients right there. Welcome. Anyway, so what we did. So he passed away about a month ago, and so his son came in, who’s my client, and said, All right, let’s sort of walk through everything. He’s an only child. So we started walking through everything I had told him. Have your dad come in? I’m happy to. Do, you know, sort of bill kind of review if you want. And he was like, no, I think, you know, he’s he says he’s got everything under control and, you know, and then all of a sudden he passes away. We start going through every account and saying, okay, let’s call to see if your beneficiary is the only child. Mm hmm. And we get to the second one we called, which was an IRA that he had with a bank here in town. And lo and behold, guess who was the primary beneficiary? His mother. Okay. Make sense? Yeah. His mother passed away six years ago. And who was the beneficiary? Nobody.

Speaker 2 Yeah.

Speaker 1 Nobody. So I’m like, he’s like what I do? And I go, That’s a probate item. Yep. So then we went down to the next one. That was fine. Went to the next one was like a money market account kind of thing at at an insurance company. So he either somehow accumulated this in his life and we all passed away. It was under his name only. No beneficiaries like what I do. And I go, Well, that’s a probate item. And so it’s just a it should have been so simple to have someone review his beneficiaries to make sure that his son was on the IRA as a contingent and actually should have been cleaned up a long time ago after his mom passed away. That’s a whole different story. But even if he was contingent, it would have been fine. But it wasn’t. And then he had this checking account that his son knew about, but just didn’t know that he had to put a tod on it or a potty, meaning that it would have passed outside of probate. So he just didn’t know to really ask for it. And lo and behold, now we got items that we got again sent through probate. It’s above the $30,000 mark, which is a simplified probate request. So now he have to go through full probate for two small accounts that are like 45 grand total. So again, that is specifically why we have a meeting dedicated every single year to talk about beneficiaries and other estate work and that sort of thing. So it’s that important. If it wasn’t that important, we wouldn’t have a dedicated meeting for it. But it is that important and that’s why we have that particular meeting. Yeah. Now you got another one?

Speaker 2 I do. So this is a current client and he’s 80. He’s mid-eighties. I don’t remember the exact day. I want to say 85 or 86 mid-eighties. Actually, you would never know it by looking at him. He was just in the office this week, actually dropping off a check for something, but just catching up with him a little bit. And he’s been a client for years. Wonderful guy. Love the guy to death. But he is super old school and in his mind, he’s, you know, he kind of puts everything in boxes. So he has this over here, this over here, and that’s this. He compartmentalizes, right? And that’s just what he’s always done. So he’s got he still has an old 41k from when he retired 20 years ago. And it’s still sitting out there and he doesn’t want to come. Consolidated with his IRA. Because to him that’s that’s his 41k that’s just that’s what that does over there write in to him that’s just it’s separate from his IRA even though they’re really one in the same. He’s got a special needs daughter. He’s he’s a widower. He’s got a special needs daughter. She’s in her fifties. And so we’ve we’ve done the trust work, right? There’s a special needs trust in place. And everything is going to flow through through the special needs trust. But he still has outside of that for one K, he’s got another account out there. He’s also sitting on he he sold some real estate so he’s got a lot of cash in it. He’s sitting on a fairly significant amount of cash in his account. And so going back to what you were just talking about, having a tod on your accounts, I asked him again, have you put a Todd on that checking account yet and or on the savings account? No. And tell me to do that. Yeah. He even mentioned to me this week when we were having a conversation. I’m starting to have those now. I’m starting to have those. What if thoughts? And I’m like, well, you know, the ones we’ve been talking about for the last couple of years, because where he’s at right now, if something were to happen to him and he’s in pretty good health, I don’t think anything is going to happen to him immediately. But what he’s at that age where what if something did happen to him? He’s got that 401k separate from his IRA. I can’t help him with that when he passes away. I can’t help his daughter with that. There’s nothing I can do to get access to that, to that money, to those funds to make sure that they go to where they need to go. Same thing with the money in that in their savings account. There’s nothing I can do in there, Todd. If the Todd is not listed, you know, on the account, it’s not going to avoid probate is going to go through probate, life is going to become significantly more difficult for and it’s not even going to be his daughter in this case is going to be for the the executors of as well for the trustees of the special needs trust who are some kind of distant family members because his daughter is not in a position to be able to take care of these things herself. So he’s going to be relying on third parties, um, to some degree disinterested third parties who aren’t even going to stand to benefit directly from, you know, what they’re going to have to do to make sure everything gets to the right place. And so I keep coming back and every time I see him I had these conversations. Are we ready to to do something with these accounts? Are we ready to consolidate these accounts? Are we ready to clean up your estate? Yeah. Yeah, I’m thinking about it. And, you know, he knows he needs to do it, but he’s just so slow to make a decision. That’s just the way that his brain works. He overanalyze those things. But but it’s I’m trying to get him to I’m trying to avoid what could be a potential far bigger issue after he passes away in only he can take care of that while he’s still alive.

Speaker 1 Yeah. Those are those are people covered looked at Lerner’s. Yeah. Yeah. Just they just don’t figure it out. Yeah. Until in some cases, too late. So here’s another reason why. When we were sitting in the meeting, we were talking about the different stories that had to do with beneficiaries. And I mean, we got to blew million of them. If you ever been to any of our adult financial literacy programs, you hear you’ve probably heard me tell the story about, you know, a life insurance policy of a doctor who’s very well known in town, had his first wife on the policy, and he’d been married 40 years or something. And we had to give the life insurance proceeds to the first wife because he never checked it. But it’s one thing to have the wrong person on there. It’s another thing to not understand the consequences of someone that you list as a beneficiary. And I’m going to give you an example. And Chris, who’s kind of eagle eyed, is standing right there. I feel awkward because I know I’m going to get this story incorrect and he’s going to blow a gasket because if you know Chris, that’s him.

Speaker 2 I’ll get it right. Yeah, I know.

Speaker 1 But this thing is so it’s important to understand how to transfer money. And that’s one of the that’s one of the conversations we have when we talk about estate work, which, again, is a specific meeting we have every year. We talk about that kind of thing. And when we do estate work, we specifically have those conversations of who, who, who’s going to benefit from this money. Where do all the assets need to go? How do they need to be transferred to the next generation? Do we need to protect the beneficiaries? And I will tell you that for the most part, you’re you’re going to do yourself a lot of good by using a trust to benefit younger people. Now, in the case of me, if my parents and, you know, I’m 50 something years old and we still used to trust, I was like, yes, absolutely. Transfer whatever you got left in a trust. And I’m you know, I’m 50 and my older sister 60. So I don’t and I didn’t see anything wrong with that. That’s why I recommend to my to my parents. But it’s the same thing when you have parents that want to benefit, let’s say a grandchild, which is what we’re talking about in this particular case, grandmother had an insurance policy, correct? I know he’s going to be like, oh, no, dude, I may not be great now, but it was grandmother had an insurance policy. And none of the family really knew who she had for the beneficiary. She passes away. They go get this life insurance policy. And the grandmother had listed the grandchild as beneficiary. As the.

Speaker 2 Sole.

Speaker 1 Beneficiary. Sole, sole.

Speaker 2 Beneficiary.

Speaker 1 It’s not that unusual other than this grandchild is almost two years old. And so there becomes this complexity that we literally had a little challenge about challenging conversation around was what what actually ultimately happens to that money? Because now the money ultimately goes to this two year old. But the parents, can they do anything with that? If they have other children? Does it can it benefit the other kids? And there’s all kinds of complexity there. Had they just listed a trust and said any offspring of, you know, the kids would have been totally fine or they could have given to the parents outright. So and I’m sure there was some weird family complexity there that said, this is why I never went to, you know, bypassed the kids and went to the grandchild. But again, that is something that if you don’t review on a regular basis and you’re not speaking with seeking advice from a professional, you can make a mistake like that. And now there’s all kinds of complexity to try to figure out what happens.

Speaker 2 And then her intentions were good.

Speaker 1 Well, her intentions her.

Speaker 2 Her intentions were good. She wanted to leave the money to the grandkids. She thought, well, not my kids don’t need the money. They’re doing okay. I’d rather benefit the grandkids. Well, that’s great. Except your grandchild is one and a half years old.

Speaker 1 Yeah. And think about what? What’s that $100,000 is going to be when the child turns 18. The state of Kentucky, when they when they ultimately get the money, or unless some somebody intervenes and does something the proper way, but nothing happens, that $100,000 could be $300,000, 200. I mean, whatever the number is in giving that much money to an 18 year old, not a good idea. Maybe there’s I don’t know. I just never in 20 years have I ever seen that turn out to be successful. Maybe there is one. And, you know, maybe someone could call in and say, well, I was one of those that came into you.

Speaker 2 The car dealerships going to benefit nicely, though.

Speaker 1 Yeah, yeah, yeah, yeah. Exactly. So any you got another story or.

Speaker 2 No, those are the two main ones and we’re probably getting pressed for time. But I mean, I think at the end of the day, I mean, where you want to be focused that focus on making sure that you’re setting up your portfolio in a way that it’s going to be simple to pass on to the next generation. And there’s a number of different ways to do it. Consolidation of accounts, making sure your beneficiaries in an order are in order, making sure the proper trust work has been done well ahead of time. The proper time to do estate planning is not when you need it, it’s when you’re thinking about it. When everyone’s still alive, everyone’s still healthy, everyone’s still of sound mind to really put some thought into making the proper decisions around where you want your money to go and who you want to inherit it.

Speaker 1 Yeah. And look, if we didn’t think that this well, first of all, we think this topic is important enough. We do a podcast and we’ve done multiple podcasts about estate planning in the past, but if we didn’t think it was important, we wouldn’t specifically have a meeting for a prospective client. That is onboarding to be a client. We have a dedicated meeting. That is all we do is talk about estate work and what it is you want to see your money go. Who do you want to benefit from it? When do you want it for them to receive it? That is a specific meeting that is on the calendar, on the onboarding process that we dedicate to nothing but estate work. Then we want to, you know, want to prospective clients like onboarding a client when they become a client. We go back and revisit that every single year and a dedicated meeting happens between January and April of every year. We have a meeting that we specifically talk about beneficiaries and estate work and what happens, you know, if something happens to either one of you, that is a dedicated meeting. And I will challenge you that if you’re working with an advisor and they’re not having this meeting every year and they’re not dedicating time to talk to you about what your state looks like and who your beneficiaries are, that’s great. Come see us. Because we do. Because it is that important for you to do that. And if your current advisor is not doing that, what come to us and I can promise you that will we’ll have that conversation every year. So again, just check your beneficiaries. That’s the biggest thing. I we can’t stress that enough and just make sure you’re doing that on an annual basis. Even if you don’t change anything, that’s fine. That’s perfectly fine. That’s the majority of the cases. But occasionally you’ll need to change something. But you also want to make sure that you’re looking at every single asset that has title so that you get it all right and it all has to mirror. I’ll give you another quick. You all has to make sure that your beneficiaries match what your estate work says. So as an example, you may have the best drawn out trust in the world that says exactly how you want money dispersed and you can have a millionaire, a life insurance policy that gives it directly to your kids. Does it go to a trust so they get the money out, right? So all that work you just did totally gets. Bypass because you don’t have the right beneficiary on there. And that’s happened multiple times. So you just have to make sure that everything works together. All the beneficiaries work together according to what it is that you want to see happen. If that works, the trust. Everything has to go through the trust. So that’s it for another week, I guess. Make sure that you watch each and every week. And we are looking for folks to to subscribe to our podcast. So if you could do us a favor and subscribe to that podcast, that would be awesome. We’re trying to get to that. I know we’re like at 50 or 55. We’re trying to get to a thousand. I know that sounds like, you know, trying to, you know, climb Mount Everest, you know, in boxer shorts. But we’re still trying to get to that point. So if you could help us, that would be awesome. If you could tell your friends and family about us, that’d be awesome. We also have another podcast called The Bourbon Podcast. I don’t really we don’t really have a title for it, but it is on our YouTube page. It’s also on our website. So make sure you tune there or check into that. Tune into that whatever you will call it. We release all of our information on a weekly basis too. So any parting thoughts?

Speaker 2 Find the money puzzle on YouTube. Subscribe. There’s a big red subscribe button. Can’t miss it. So yeah. Appreciate you listening on whatever platform you’re listening on if you’re watching on YouTube once again, appreciate it. Hit that subscribe button. Be the first to be notified whenever we drop into new content and please feel free to share with any friends or family that you feel might benefit from anything that we had to say here. Appreciate it. The information given herein is taken from sources that IFP Advisors, LLC, doing businesses, independent financial partners, IFP, IFP Securities, doing business. This IFP and its advisors believe to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and or legal advisor before implementing any tax and or legal related strategies mentioned in this publication, as IFP does not provide tax and or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. This report may not be reproduced, distributed or published by any person for any purpose without AFP’s express prior written consent. Securities offered through IFP Securities, LLC doing business as independent financial partners, IFP Member of FINRA and SIPC. Investment advice offered through IFP advisors doing business as IFP a registered and investment advisor, IFP and Family Wealth Planning Partners are not affiliated. The information given herein is taken from sources that IFP Advisors LLC doing business as IFP, IFP Securities, LLC, doing business as IFP and its advisors believe to be reliable. But it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and or legal advisor before implementing any tax and or legal related strategies mentioned in this publication, as IFP does not provide tax and or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors.