News you can use: 6 easy steps to avoid estate planning mistakes

Make the most of your retirement funds for your heirs and charity

When it comes to estate planning, there is often confusion about the treatment of retirement plans—such as individual retirement accounts, employment stock ownership plans, pension plans, 401(k) plans, or 403(b) plans. You may not be clear on how your retirement plans will get transferred to your heirs or favorite charity. Failure to properly understand and document your wishes can cause your beneficiaries a lot of grief (not to mention a lot less money).

An article by Forbes describes six easy steps to avoid the most common estate planning mistakes when designating beneficiaries of your retirement account(s). We have expanded on these steps below. By following these guidelines, you can be sure your personal and philanthropic intentions are properly carried out.

6 easy steps to avoid common retirement planning mistakes:

1.  Always name a primary beneficiary (or beneficiaries). The beneficiary can be a family member, friend and/or a charity, such as Duke. If a retirement account does not have a beneficiary listed, the financial institution will determine how the account will be distributed.

2.  If your primary beneficiary is an individual, you should name a contingent beneficiary in case your primary beneficiary passes away before you do.

3.  Avoid naming your estate as the beneficiary. In doing so, your estate may have to pay income taxes on the entire distribution or pass the income tax burden to the estate beneficiaries.

To illustrate this point, take a look the following example of a $50,000 distribution from an IRA.

If the IRA is left to an estate, the funds may be used to pay estate expenses and the IRA is now subject to probate fees. Nearly $20,000 may be owed in taxes, leaving significantly less to the beneficiary. If left to charity, the full amount would be received.

4.  Review your beneficiary forms annually to make sure your interests have not changed.

5.  Update your beneficiary forms and estate documents when there has been a change in your life, such as the birth or adoption of a child, marriage, divorce, or death of a loved one. On a personal note, I had to remind my husband to add me as his IRA beneficiary after our marriage!

6.  When updating your beneficiaries, request written confirmation from your retirement custodian. Double-check the documents to ensure that the beneficiary changes have been made correctly.

Estate planning can sometimes be complex, but by taking a few extra steps now you can ensure that the retirement funds you worked so hard to save will be used in the way you intended. Your heirs will thank you, too!

If you would like to learn more about designating Duke as a beneficiary of your retirement account, please contact a member of our team.

TAGS: News You Can Use Estate and Retirement Planning

About the author

Jane Lee Heuser

Jane is a native of Chicago and moved to North Carolina in 2005. She is a graduate of the University of Illinois and joined the Office of Gift Planning in 2012. Jane is responsible for handling the day-to-day administration of Duke’s trust and gift annuity accounts. She also works with donors in developing their charitable plans.

Prior to joining Duke, Jane managed trusts and estates at a small law firm and was a vice president with the Northern Trust Company in Chicago. Jane loves to travel and is conversant in Cantonese and French. She keeps busy with her family and is an active volunteer in Durham and Chapel Hill.