Episode 41: Why You Should Review Your Beneficiary List Annually

Welcome to another edition of Wisdom and Wealth! When is the last time you reviewed your beneficiary list? Listen in to why you should be doing this annually and what life events should trigger this review automatically. 

music by bensound.com

Please check out and subscribe to my Youtube Channel and Newsletter!

JOSH KLOOZ, CFP®, MBA
WEALTH ADVISOR

Phone 281.719.0036
Text 281.699.8691
Fax 281.719.0156
jklooz@carsonwealth.com

1780 Hughes Landing | Suite 570
The Woodlands, TX 77380

Music by bensound.com

Transcript

Joshua Klooz  0:01  
Welcome to the wisdom and wealth podcast, a series of conversations designed to equip our listeners with helpful insights necessary to simplify the critical decision points of life. We believe true wealth is the thing Money cannot buy, and death cannot take away. Furthermore, we also believe our calling is to enable others to fulfill their own. And to that end, we endeavor. 

investment advisory services offered through CWM LLC, an SEC registered investment advisor.


Welcome in again to another episode of the wisdom and wealth podcast. As always, I'm Josh Klooz, the senior wealth planner here for Carson wealth in The Woodlands, Texas.


As the end of the year approaches, I think it's natural for us to start thinking about many of the different things that we've got going on, and just the different items that need our attention before the close of the year. And one of those things that I think is is under underrated, but definitely valuable is reviewing your current beneficiaries and your estate plan as it relates to your beneficiaries. So why would you do this? Well, for starters, tax reasons, you know, another that immediately comes to mind is things change the plan that you put together, you know, say five years ago, you know, given changes to tax code, and whatever else may not be as you intended it back then. 

So, in starting out, you know, what are some of the things that you need to consider? So, first and foremost, making sure that everything is up to date, you know, have you considered the designations and how it reflects in your overall estate wishes, and make sure that, you know, sometimes the liquidity or illiquidity or income and cash flow of your heirs, it isn't stagnant, it's changes. So that may be something to take into consideration, given the last time that she made the plan. Another thing that very few people take into consideration, in my opinion, is how the assets that they're wanting to pass on, affect those in in receipt of it, when they pass away. So whether it be taxable versus non taxable, qualified investments, so on and so forth, that has an outcome. So make sure that you're taking those types of things into consideration. And again, that's something that your financial planner, and we take into consideration as well, with just a little bit of modeling.

You know, our the other piece that often very few people take into consideration, and one of the reasons we asked for estate plans here at our office is to ensure that the beneficiaries at your of your investments actually match up with what your estate plan asks and what your trust documents dictate, should happen. So you want to make sure that, you know, if your account is set up to transfer in a certain way that you know, your trust, and your wills actually coincide and align, remember, you know, goes without saying beneficiaries take precedence over what the actual legal document says. So you want to make sure that they they line up for sure.

Another item that often goes overlooked is, if you're charitably inclined, do you need to review your investments and ensure that you're leading the right investment for charity? So I'll give you an example. If you have a qualified account that you are leaving to your heirs, they have 10 years to get that, basically empty that account and it hits their, you know, their their cash flow is regular taxable income. Well, if you're charitably inclined, and you had to choose between leaving that a taxable, you know, or just something that was taxed at capital gains rates and would would would normally receive a step up and basis upon your passing. Why would you leave that to charity? Why wouldn't you leave a fully taxable account which will or a fully taxable account, which will get no tax on it when you leave it to charity? Why wouldn't you orchestrate in such a way that your heirs would get to step up and basis and then a capital favorable capital gains rate and optimize your account and your estate in that way.

The other piece that is very nuanced, but definitely takes into consideration is the proportions of your qualified versus non qualified accounts as they're being distributed to your heirs. So it goes without saying that you want to take the income law. Both of your heirs into consideration and you don't want to make a their current tax situation less favorable than you possibly could. So if you can balance the giving of regular taxable income that they're going to receive on their tax return, versus capital gains income, which they can actually moderate to their income and their lifestyle, you want to level that out as much as possible to ensure that your assets actually, you know, move on with some flexibility and match your your heirs lifestyle.

Another thing that you want to take into consideration is if you have your state listed as a beneficiary, so remember, assets left your state are going to go to probate. So you're going to want to make sure that you consider updating your beneficiary if this if that doesn't accurately reflect your wishes, it's just definitely something that might go overlooked.


What about if you have your accounts in a trust is listed as a beneficiary. So consider reviewing those trust provisions ensure that the trust is still up to date, make sure it's relevant to your wishes, and make sure that if there's something in there such as an annuity, you might want to take into consideration just the different challenges and limitations that that that vehicle has, and how it might affect your situation. The other piece again, and I've hinted at this before, but I'll go ahead and just put it out there. As you know, the current RMD rules for an inherited IRA, are very stringent. And they can put your heirs in a in a particular bar bind if you're not careful. So whereas you used to be able to spread out if you if you inherited an IRA from a relative, you could spread that out over a long series of years, longer series of years, now you only have 10 years to get that vehicle emptied. So the IRA has to come out in, you know, most for most people typically make sense to take it out over an equal series of 1010 years to smooth out the tax rate. But you want to make sure and mitigate how that how those taxes are going to be realized.

I don't think we necessarily have anybody that is missing this particular instance. But you should always be at least curious, if not concerned about your estate tax liability. I think for a lot of people, in the past few years, they've been enjoying the fact that the exclusion has gone up significantly per person. But that's going to sunset here in a few years. So you're going to want to consider different ways that you can remove assets from your estate. And and, you know, freeze the those asset values so that you're not further adding, you know, to your estate tax liability if that situation, either today is an issue for you or might be an issue for you in the future.

We run into this occasionally where, you know, people are kind of right on that borderline. And I would hate for someone to not do appropriate planning. And then you know, have a significant amount of estate taxes due because they just didn't think it applied to them. And in this situation. We have no idea where state tax rates are going. But we do know that they probably will go down if you know if the oddsmakers are correct, and it's just a matter of how much lower they would go. So why not take full advantage while you possibly can if you're anywhere close to that estate tax line.

Hopefully this has been helpful for you and just got some different creative ideas turning for you locally. If there's anything that has resonated or that has popped up for the question marks, I'm happy to help you walk through that and happy to walk through your specific situation and see what makes most sense for your specific situation. Thank you again for your time hat and we look forward to talking with you again. Well, that's all for today. Thank you again for joining us. We trust that you are better equipped to steward both your wealth and your financial resources. If you have questions or suggestions for future topics, please direct those to info Houston, Carson wealth.com. But you and your family uncover truth, beauty and goodness.

The opinions voice in wisdom and wealth with Josh coins are for general information and are not intended to provide specific advice or recommendations for an individual as performance is no guarantee of future results. investing involves risk, including possible loss of principal, no strategy guarantees success for protects against loss to determine what may be appropriate for you. Consult with your attorney, accountant, financial or tax advisor prior to investing. Investment Advisory services offered through CWM LLC, an SEC registered investment advisor. Our address is 1780 Hughes landing, suite 570, The Woodlands Texas

Transcribed by https://otter.ai