Often it takes a calamity close to home or the loss of a loved one or friend to prompt us to focus on our own mortality. When you die, who gets your stuff?

Often it takes a calamity close to home or the loss of a loved one or friend to prompt us to focus on our own mortality. When you die, who gets your stuff?

On Friday, May 8, a dad, two brothers, and a brother’s fiancé, were planning a fun weekend in Mississippi, celebrating a younger brother’s college graduation. They were not planning to die in a fiery plane crash on I-285 in a failed takeoff from Atlanta’s Peachtree-DeKalb airport. Caught in the resulting massive traffic snarl as I drove home from the Atlanta airport, radio reports of the unfolding tragedy underscored how quickly assumptions about our future can change or end in seconds.

You work to accumulate assets. Since you cannot take them with you to the afterlife, do you have a plan for the distribution of your assets? Or is the task left to loved ones to wrestle with at a confusing time of loss and stress?

A will is only one part of an estate plan, and according to Rocket Lawyer 64% of Americans have no will. A will may designate who gets what such as a residence and other specific bequests. Assets not specified are subject to a probate proceeding as a court oversees distribution.

For many individuals and households, significant assets are represented by retirement plans, deferred compensation agreements, annuities, life insurance policies, business related buy-sell agreements and stock option plans. Distribution of these assets may be governed by beneficiary designations or trust arrangements, not by a will.

For any qualified plan or IRA, insurance contracts (group or individual), annuities, a beneficiary designation is required. You should designate a primary beneficiary, usually a spouse or other loved one, and a contingent beneficiary, the person or persons who will receive assets if the primary beneficiary predeceases you.

Beneficiary designations are important to other asset classes as well. If you follow a philosophy of “set it and forget it” the law of unintended consequences can cause major distortions in the distribution of assets, unnecessary legal costs and taxation, and unintended heirs. Anytime you experience a major transition such as marriage, divorce, remarriage, birth or adoption, loss of a child or other loved one, you should review the primary and contingent beneficiary designations for all assets.

Those who have not reviewed their will in years, often have no idea how beneficiaries are designated. Have you reviewed your plan lately?

Qualified retirement plans and IRAs are key as often the bulk of retirement assets are there. What if the primary beneficiary develops Alzheimer’s disease or other cognitive impairment? You cannot leave assets to him or her; trust planning may be called for.

If you make your “estate” a beneficiary of retirement plans, adverse tax implications arise. Your adult children, for example, would have to cash out the account within five years and pay all taxes due as ordinary income. As an Inherited IRA they can “stretch out” distributions and taxes potentially for decades. They must not co-mingle an Inherited IRA with any other account and they must take Required Minimum Distributions (RMDs) each year even though they are under age 70 ½. For a young person, the RMD is relatively tiny allowing the bulk of the money to continue to grow.

In running a beneficiary designation audit for clients, often we find no contingent beneficiary listed, or a contingent beneficiary is dead, impaired in some fashion, or an ex-spouse. If you and your primary beneficiary such as your spouse die simultaneously in an accident or natural disaster, the Uniform Simultaneous Death Act specifies that the primary beneficiary will be presumed to have died first. With no contingent beneficiary, proceeds flow into your estate, again with potential legal complexities, costs, and adverse taxation.

Assets should not be left to minors outright. Trust planning may be called for with consideration given to distributions when they are of age. Will they be mature enough at given ages? Adult children who have made unfortunate life choices require careful thought. Distribution of retirement plan assets to minor children calls for specific legal expertise.

For disabled children and adults, “special needs trusts” may be called for so as to preserve access to public and community benefits and education programs. Even a small inheritance could disallow aid.

If you have any net worth at all, estate planning is not a do-it-yourself project. People of faith hope to die in a state of grace as they meet their Creator. Endeavor not to leave behind a complex mess as part of your legacy. Planning does not cost. It saves...money and headaches!

Lewis Walker is President of Walker Capital Management, LLC. Certain advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative of SFA which is otherwise unaffiliated with Walker Capital Management, LLC. lewisw@theinvestmentcoach.com

AL2o];