We’ve written many articles here on the Blog concerning proper estate planning – specifically, how to avoid the errors and oversights that can wreak havoc among your heirs after you’ve passed away. Just last week, for example, we posted this article listing common estate planing mistakes. It’s an important topic for us all. 

However, we frequently come across news stories such as this recent New York Times report reminding us of yet another aspect of estate planning that needs our attention. In this case, reporter Tammy LaGorce is calling our attention to the importance of having beneficiaries to assets in our estate properly designated – not merely as a way to avoid conflict, but more importantly as a means of streamlining the inheritance process.  

She offers evidence to suggest that, if your beneficiaries aren’t properly designated on certain types of assets such as retirement accounts, your heirs might be in for months of unnecessary legal headaches. Along the way, LaGorce also answers the question, “Do I need a will, or do I merely need a simple designation of beneficiaries?” Her answer: you need both. In her words, “Although a will is crucial to making sure your assets go where you want them when you die, you are likely to need something else, too: designated beneficiaries.” 

(Please note that you may need a subscripti0n to access the New York Times article.) 

One Family’s Story: Aunt’s Oversight Generates Legal Headaches 

LaGorce begins her article with one family’s tale. A Massachusetts man named Zygmund Furmaniuk was designated co-executor of the estate of his Aunt Mary who had died in 2023. She had created a trust, LaGorce writes, to hold her assets and to distribute her $1 million estate. The aunt was a retired teacher, single, with no children. 

“Creating the trust, Mr. Furmaniuk said, was her way of making sure her assets ended up where she wanted them — with him and three other nieces and nephews,” LaGorce reports. “But even though his aunt had a will, the arrangement caused considerable frustration for Mr. Furmaniuk” and a cousin who was the other co-executor. 

The Hard Part: Dividing Up Individual Retirement Accounts 

According to the New York Times, handling much of the estate was relatively simple. “The hard part wasn’t figuring out the sale of her house and what to do with her valuables,” says LaGorce. “The more complicated part was distributing the money in her individual retirement accounts, which had been placed within the trust — but without designated beneficiaries.” 

As Mr. Fermaniuk explained to the Times, “If she had made us each 25 percent beneficiaries directly on her I.R.A.s at Fidelity, not from within the trust, the monthlong duration of paperwork I had to go through, which ended up the size of a small phone book, would have been unnecessary.” 

LaGorce writes, “Major brokerage firms like Vanguard and Fidelity ask savers to name designated beneficiaries — the people they want to inherit the money when they die — when they open individual retirement accounts or 401(k)s.”  But for some reason the aunt’s wishes had remained unclear, which turned a simple process of disbursement into a complicated part of the probate proceedings. 

However, lest we conclude that proper designation of beneficiaries eliminates the need for a will – or vice versa – LaGorce is quick to stress that we should have both. 

Your Will is a Foundational Part of Your Estate Plan 

In her New York Times article, LaGorce gives us a very basic primer in estate planning. “Wills are legal documents that lay the groundwork for dividing valuable possessions, like real estate, in addition to investments and cash when a person dies,” she writes. “If you die without one, the state where you were a legal resident will take over distributing those assets. And that can become a complicated web.” 

Part of the complexity stems from the fact that inheritance laws vary state-by-state, especially in cases where someone dies without a will. “Often, it’s the person’s closest living relatives, such as a spouse, parents or siblings [who inherit],” the article explains. “But defaulting to state laws involves rulings from probate courts, which handle legal decisions when someone dies. Getting those rulings often requires heirs to invest their time and money, and can significantly delay the settlement of an estate.” 

The Probate Process Isn’t Always Logical or Simple 

Depending on state laws, decisions made by probate courts aren’t always straightforward in cases where a decedent hasn’t made his or her wishes known. For her article, LaGorce spoke with Dr. Gal Wettstein of Boston College, who said that courts often act logically, up to a point. 

“When it comes to dying without a will, there’s this idea, and it’s not crazy, that the defaults that states adopt are broadly in line with what people would want to do anyway,” Dr. Wettstein told the New York Times. However, the article adds, when it comes to certain assets such as real estate or (as noted above) retirement accounts, things can get complicated.  

LaGorce writes, “A deed to a house or land has to be clear before the heirs can sell it, Dr. Wettstein said. If there is a disaster, such as a fire or flood, before the property is sold, heirs may also have trouble filing an insurance claim to make repairs.” In the case of the Fermaniuk family, the culprit was a missing beneficiary form. The result: protracted legal delays. 

The Evolving State of the American Family 

As the New York Times article relates, one peril of relying on the default decisions of state probate courts is that those so-called “traditional” guidelines often fail to acknowledge how dramatically the American family has changed in recent years. 

As Dr. Wettstein of Boston College puts it, the default decisions made by probate courts “are not well suited to nontraditional family structures.”  He adds a common hypothetical example: a parent may have a stepchild who was never formally adopted. In some probate situations, that child may not receive anything when the parent dies, because there was no will. 

Designated Beneficiaries Have a Far Easier Process 

For those with retirement accounts, the benefits of clearly-designated beneficiaries are glaringly obvious. 

“While wills must be administered by a court,” says LaGorce, “designated beneficiaries may need only to show their identification and the account owner’s death certificate to an institution like Vanguard to receive a payout.”  She reminds us that procedures for distribution will vary with each institution, so you’ll need to do your homework.  

The bottom line, LaGorce adds, is simple: “The key is that naming beneficiaries will help your heirs bypass probate court and its costs.” 

Even Those with Limited Resources Need a Will 

The New York Times article emphasizes that a complete estate plan needs a will as well as clearly-designated beneficiaries on all accounts and assets. Ater all, says LaGorce, there are important considerations such as care for minor dependents, care for pets, and distribution of valuable items that can best be handled with a will. 

“Ideally, everyone should write up a will, including young people, each individual spouse and people living with partners, even if you think you don’t have much to pass on,” retirement consultant Marcia Mantell told LaGorce. “Even a computer, cellphone and other tech should be passed to someone you personally name. This helps settle your estate outside of the probate courts.” 

Your will can be prepared professionally, or you can do it yourself, says the article. But if you decide to save money and go the DIY route, make sure you’re not overlooking important elements that your state requires. 

Preparing a Will: Professional Help vs. DIY 

“Two of the most common ways of drawing up a will are hiring an estate lawyer and using an online template,” says the New York Times. “For those going the DIY route, it’s important to note a few technical details. First, because wills are subject to state laws, make sure to include elements your state requires. Sometimes that means recruiting a witness or two to sign the will.” 

You can start with an online search such as “preparing a will in Washington” and you’ll see plenty of options.  

But even well-intentioned do-it-yourselfers can find themselves entangled in a legal thicket. The last thing you want to do it to create a will that later proves invalid or inaccurate. Instead, we recommend contacting an estate planning attorney for professional advice. The experts at Life Point Law stand ready to help you find your best solution, no matter what your budget. 

Transferring Your Wealth Can Be Transformative 

While it’s easy to dwell on the legal aspects of wills and beneficiaries, LaGorce reminds us in her article that the transfer of assets between generations can transform the lives of your heirs. One man we know who had recently inherited an uncle’s home called the bequest “a game-changer” for his family. 

The transformative power of bequests was the topic of a study by the Center for Retirement Research at Boston College.  “Despite the advantages of having a will, only about two-thirds of households with heads ages 70 and older had a will in 2020,” the authors wrote. Sadly, the share of white households with a will was more than twice that for Black and Hispanic households. People of color are far less likely that their white counterparts to report receiving any type of inheritance. 

“But transferring wealth often lays the foundation for the kind of future families strive for,” the Times article concludes. “The transfer of wealth via inheritance can propel a family into homeownership or a better school district, for example” – outcomes that can be impossible through the traditional method of striving and saving. The important thing is to make certain your bequest goes where you want it to go. 

Rajiv Nagaich – Your Retirement Planning Coach and Guide 

The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public. Retirement: Dream or Disaster joins Rajiv’s ground-breaking DVD series and workbook, Master Your Future, as a powerful planning tool in your retirement toolbox. As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.  

You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read. 

Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more. 

Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.  

Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important message. And remember, Age On, everyone! 

(originally reported at www.nytimes.com)