After writing articles on financial planning for the May and June issues of Practical Accountant, I concluded that not enough is being done with regard to beneficiaries. Let me explain.
The first article dealt with estate planning pitfalls of retirement planning distributions; many of them involved mistakes by beneficiaries such as taking all the money out of a qualified plan and rushing a spousal IRA rollover.
The June article on planning for professionals included disdain for the "I Love You" will. Taking into consideration such factors as the uncertainty of the estate tax and amount of the unified credit, the availability of the unlimited marital deduction, and possible income tax ramifications, one planner advised replacing the "I Love You" will with one that has a number of contingent dispositions and beneficiaries. The reasoning is that by doing so, the maximum options are available when the professional dies. The idea is disclaimers can be made by beneficiaries to ensure the property passes in the optimum way.
I wonder how many beneficiaries in financial plans that you have prepared or reviewed did the wrong thing without even knowing it. Maybe someone accepted a bequest unaware of tax savings that could have resulted if a disclaimer had been made.
Being a proactive guy, I have come up with a solution to this problem. I propose that there be a new certification. No, it is not for the planner; it is for the beneficiary.
The certification is CB, which stands for certified beneficiary. To get the certification, the beneficiary would have to complete a 60-hour program and take a four-hour test that will be given and administered similar to how the CPA exam is now done--online in test centers across the country. It would cover subjects such as estate taxation, income taxation, creditor protection, money management, trusts, and life planning. There would be a continuing education requirement--CBE (continuing beneficiary education)--just as there is one for CPAs.
Now comes the important part. All your clients will state in every dispositive instrument that the beneficiary is only entitled to the asset if he or she is a CB. Of course, I want to be fair so any named beneficiary will have a limited time to get the certification. It would be no more than 90 days from the death of your clients. This way there would be plenty of time for a beneficiary to make a disclaimer, if advisable.
And if this takes off, We could publish a new magazine, Practical Beneficiary, PB for short, for CBs of your clients.
