This $400k IRA mistake doesn’t have to be your client’s mistake!

So you review:

1. Beneficiary wording – is it current, I had a client who still had his ex-wife of 20+ years earlier on his work life insurance because when he remarried some 18 years earlier he changed beneficiary on other policies but forgot about this, his current wife was none the happier when I pointed this out but grateful they realized this mistake, of course I helped them make the correction. Check to make sure the beneficiary wording includes or the policy includes a common accident provision.
2. Ancillary policies – check all policies that are, could be or will be duplicate coverage when one or both of them get on Medicare and get some kind of supplement to cover the expenses Medicare doesn't cover. Many cancer plans end when they turn 65, several travel accident plans cover hospital/doctor or medical benefits that become moot when they are on Medicare and ancillary indemnity plans may continue to cover the spouse but not the person retiring, all of these could free up premium dollars they can reposition to products that better fit their needs in retirement and can save them money for plans they no longer need.
3. Will/Trust – if they don't have a will/trust suggest or better yet have a working relationship with a competent attorney you can refer them to. If they do have a will/trust review it and make sure beneficiary wording, distributions and medical issues coincide with wording on policies they have, private and at work.

My experience is when you do this review you will find something of concern in each of these three areas and you may have never thought of or noticed these concerns without using a presentation similar to this one.

So why is this important and who is Leonard Smith?

Leonard Smith lost his battle with cancer in 2008, he had a financial advisor and an attorney, and in fact he had a well laid out plan that included a will his attorney crafted. Leonard had an IRA and in the beneficiary wording on the IRA form the wording was "…to be distributed pursuant to my last will and testament" and therein laid the problem for his kids.

Leonard Smith had remarried two months before he died, apparently neither his attorney or his financial advisor sought to check long forgotten IRA beneficiary forms and consider how that wording could override current wills thereby undermining his intentions.

Beneficiary forms are part of a private contract between the insured and the insurance company; they dictate how and in what manner the insurance company must distribute the stated benefits of the private policy of the individual.

A person's estate is governed separately so when a will or trust designates one person as the beneficiary and a private contract beneficiary wording designates someone else, the private contract will prevail, in most cases.

Could Leonard Smith's financial advisor have helped him change the beneficiary wording by specifically listing the names of his children with the percentages designated to each? Would correcting that simple mistake have avoided leaving his kids out of what he intended them to receive, as determined after the kids fought in court?

In an article I wrote several years ago I said "Finally, keep in mind that the person clients name as beneficiary of their tax-deferred plans is only one of several pieces that must fit together for a successful estate plan. The best results are generated when all the pieces — tax-deferred accounts, IRAs, life insurance, investments, business interests, real estate, and other assets — fit together in a coordinated plan."

I'm guessing Leonard's kids feel the same way, I'm sure you don't want your client's family to go through something like this. The sales presentation is always about the client, never about the product. The product is a "solution" but to what? Can you solve a problem you don't know exist, does your presentation ensure the solution is the product or are their other issues that should be addressed before the product becomes an important part of creating a lasting solution for your client?