Two Words Could Undo Your Entire Estate Plan

Benjamin LongBeneficiaries, Estate Planning, Inheritance

The Importance of Accurate Estate Planning

“’Per stirpes’ vs. ‘per capita.’ Making the wrong choice could cause an estate planning disaster.”

No one relishes the idea of planning for their own death, but the alternative of not planning and leaving your family members to sort out an expensive mess is a poor way to be remembered. According to a recent article from Kiplinger, titled “These 2 Words Could Send Your Retirement Money to the Wrong Beneficiary,” this information could save you from accidentally cutting someone out of your will.

Ensuring Beneficiary Designations Align with Your Wishes

First, always be sure the beneficiary designations on your retirement accounts, insurance accounts and any other accounts that permit you to have a named beneficiary, match up with your will and your wishes.

Avoiding Probate with Proper Planning

Property and assets outside of your retirement accounts will be distributed by other estate planning tools, like trusts, or TODs (Transfer on Death) for jointly held assets. If you don’t make plans otherwise, most of your estate will go through probate. It’s can be expensive and time consuming, but with the right planning, it can be avoided.

Choosing the Right Beneficiaries

Primary and Contingent Beneficiaries

Most people name their spouse as the primary beneficiary on their retirement account. If you don’t wish to do this, you may have to fill out paperwork and have your spouse sign a waiver agreeing to this. Federal law protects spouses, when it comes to certain types of retirement accounts, and ensuring that spouses receive each other’s retirement accounts is important, unless waived. After naming your primary beneficiary, you name contingent beneficiaries. If you are married and have children, it’s likely that your children will be your contingent beneficiaries.

Using Retirement Funds for Charitable Giving

No children? In that case, a niece or nephew or other family member is usually named. By the way, if you want to give to charity, then retirement funds are the perfect asset to give.

Per Stirpes vs. Per Capita: The Crucial Decision

The next decision to make is the key one: per stirpes or per capita. This step is often missed, because it’s not used on every asset form.

Understanding the Implications of Per Stirpes

Per stirpes is a Latin legal term that simply means if your primary beneficiary dies before you die, their next of kin inherits your assets.

The Effects of Choosing Per Capita

The alternative is per capita. By choosing per capita, your money only goes to your primary beneficiaries.

Here’s an example of how per capita might work.

Imagine a grandmother, daughter and granddaughter. The daughter is the primary beneficiary on the grandmother’s retirement account, but the grandmother forgets to name a contingent beneficiary.

If the daughter dies before the grandmother and the daughter is still listed as the primary beneficiary when the grandmother dies, the money won’t go the granddaughter. The money will go through probate and the court would decide who receives the money. Had the grandmother selected per stirpes, the money would have gone straight to the granddaughter, even if she were not listed as a contingent beneficiary. When you choose per stirpes, the next of kin to your primary beneficiary (or your heir’s heirs) receive their share of your property.

This is how per capita works. Per capita ensures that your money goes to your primary beneficiaries only. Per capita is also typically the default option most retirement savers have in place right now.

Avoiding Costly Estate Planning Mistakes

Recognizing the Default Option and Making Informed Choices

Depending on how you want your inheritance handled, it’s easy to see how this could be a costly estate planning mistake.

Secure Your Legacy with Expert Estate Planning Assistance

In conclusion, carefully considering your estate planning options, including beneficiary designations and the choice between per stirpes and per capita, is essential to ensure your assets are distributed according to your wishes. Don't let your hard-earned retirement funds end up in the wrong hands or tangled in a costly probate process.

As a knowledgeable and experienced Kansas Estate Planning Attorney, I, Benjamin Long, am here to help you navigate these complex decisions.

Contact Schlagel Long today for a free consultation, and let's work together to create an estate plan that truly honors your legacy. Call us at (913) 359-8996, and let's secure your family's future together.

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