Estate Planning – Don’t Overlook it!

If you have been following our recent blog postings, you may have noticed we have been focusing heavily on the investment management side of our business. However, comprehensive financial planning involves a wide variety of topics. Our next few blogs will primarily target estate planning topics that the general public is typically unaware of. It is our personal opinion that estate planning is one of the most commonly overlooked areas of financial planning.

To start, we will be discussing the differences between Per Capita and Per Stirpes beneficiary designations. This is the first layer of estate planning that many individuals come across. These beneficiary designations are most commonly found within life insurance policies and retirement savings accounts.

Per Capita Designation – What’s it Mean?

In terms of estate planning, this means that every surviving heir will receive their appropriate share. If an heir has children and the heir passes away, those children will not receive their parent’s share and instead, it will be divided among the surviving heirs.

Suppose Bob has three children and Alice and Charles also each have children of their own. If Alice passes away before Bob, her children will not receive anything. The inheritance will be split among Bob and Charles only. The major downside to Per Capita is that you may unintentionally disinherit your grandchildren should any of your children predecease you.

Per Stirpes Designation – How’s it Different?

In terms of estate planning, this means that every heir will receive their appropriate share, regardless of whether or not they are still alive. If an heir has children and the heir passes away, those children will receive their parent’s share instead.

Suppose Bob has three children and Alice and Charles also each have children of their own. If Alice passes away before Bob, her children will receive the share she was entitled to under a Per Stirpes designation. David, Kat, and Sadie will all split Alice’s 1/3 inheritance. The major downside to Per Stirpes is that assets may be passed to a younger generation unintentionally if a parent wants to focus on helping their children instead of grandchildren.

Per Stirpes

Any Questions?

Lastly, we always urge individuals and families to ensure their beneficiary designations are up-to-date and labeled appropriately. If possible, contingent beneficiaries should be listed as well just in case the primary recipient predeceases or simultaneously deceases the original owner. It is always a great idea to have a backup beneficiary.

If you have any questions about taxes, your individual investment portfolio, our 401(k)-recommendation service, or anything else in general, please give our office a call at (586) 226-2100. Please feel free to forward this commentary to a friend, family member, or co-worker. If you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.

We hope you learned something today. If you have any feedback or suggestions, we would love to hear them.

Best Regards,

Zachary A. Bachner, CFP®
with contributions by Robert L. Wink, Kenneth R. Wink, and James D. Wink.