I was recently speaking with a client who stated that they were speaking with their financial advisor and updated all of their beneficiary designations on their financial accounts. This client indicated that their financial advisor informed them that they did not need estate planning because all of their accounts have beneficiary designations, and therefore, avoid probate. Further, their financial advisor informed them that as their estate is not subjected to estate taxes, there is no need for estate planning.
I listen to this type of comment everyday from Tennessee families regarding "advice" that they received from their financial advisor or CPA. Unfortunately, the client loses out in the end by relying on poor advice. To say that someone doesn't need estate planning because of beneficiary designations or because of no estate taxes is similar to someone saying that they do not need to go see a doctor for their broken leg because heart disease does not run in their family.
First of all, properly completed beneficiary designations was never meant to be a replacement to comprehensive estate planning. Second, estate tax planning is just one aspect of someone's estate planning.
Nearly every week I will see a client's beneficiary designations that are completed completely inappropriately and inaccurately. For instance, I have seen a beneficiary designation that states "the estate of." This is an easy way to ensure that a non-probate asset goes through probate, and therefore complicates the estate settlement process for the surviving family. I have even seen beneficiary designations list the beneficiary as "the last will and testament of client."
First and foremost, properly completed beneficiary designations on your financial accounts are just one aspect of your comprehensive estate planning. It should never be considered a replacement for a Last Will and Testament, Living Will, Durable Power of Attorney, and Health Care Power of Attorney. In addition, families should have a comprehensive plan that meets their goals and wishes for their family.
Before you say you don't need estate planning, take the wrong advice, or sign any will or trust, please contact our office to receive our FREE Reports on Estate Planning or Dan Perry's Book - Estate Planning for Tennessee Families - How to Keep Your Estate in the Family and Out of the Government
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Daniel A. Perry