By: Sanford R. Altman, Esq., retired

Do you have a Will? Do you have an IRA or 401(k)? Do you have life insurance? What do these all have in common? Beneficiaries. Those who inherit your assets.

One of the issues I see with many of my clients is that beneficiaries are chosen many, many years ago, often when the documents are first created. Circumstances have changed dramatically but the beneficiaries remain the same. You may review how well your investments are doing in your IRA, but did you check to see who it goes to do should you die? Does your choice of twenty years ago still make sense?

There are several prominent areas where this comes into play. The first one to consider is when your beneficiary, often a spouse, is now or is likely in the near future to be in a nursing home. With the nursing homes currently costing up to $15,000.00 per month, we do look for those who find themselves in this situation to become eligible for Medicaid to help defray the expenses. However, if an individual who has become eligible for Medicaid receives the proceeds of a life insurance policy or distribution from a will or trust, the result may not benefit him or her at all because it may simply result in becoming ineligible for Medicaid and paying the nursing home privately out of pocket. In other words, all that you have left for your loved one, instead ends up with the nursing home.

Caution is also necessary when have you have named a disabled individual receiving government benefits as one of your beneficiaries. This often occurs in a will or a trust when you name “all of my children” or the equivalent as recipients. Since you have not named them specifically, it may not occur to you that one of them is disabled and needs to be treated differently. This also occurs when you are naming each one individually such as in life insurance policies simply because it is your nature to be fair and have everything distributed equally. The problem with this is, of course, a disabled child may currently (or quite possibly in the future) be receiving government benefits that are needs based – they will be cut off if the disabled persons have assets over a certain amount. By giving it to them you are really giving a gift to the government. We all know how many of us love to do that.

There is a fix to this. You can create (or have your lawyer create) a Supplemental Needs Trust which is specifically authorized by the law to hold funds for the benefit of a disabled individual without having a negative impact on his or her receiving government benefits. Instead of leaving funds to the individual, you leave it to the Supplemental Needs Trust and those monies can be spent on your loved one to uplift the quality of life over and above the small amount he or she is receiving from the government. It should be noted that this may not be practical for someone who is in the nursing home, where they take care of all of his or her needs in any case.

Another area that should not be overlooked is the “contingent beneficiary”. It is very common for one spouse to name the other as primary beneficiary for a life insurance policy or other financial vehicles such as annuities without any other backups. If they both should become victims of a common accident or disaster or if one dies first and the other dies some time later without making a change in the designation, it all ends up going to the estate of the second to die. This means that your family must go to a lawyer to petition the court for a probate or an administration proceeding. This may be exactly what you are trying to avoid by naming a beneficiary. And, of course, if you happen to be in a position where your heirs are in one of the categories we mentioned above-in a nursing home or disabled receiving benefits, they may end up receiving the funds despite your good intentions.

So it is wise to examine carefully who you have named in all of your estate planning documents-wills, trusts, annuities, retirement plans and even bank accounts to make sure that all of your loved ones receive exactly what you wanted for them.