Life and Death Planning for Retirement Benefits

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Appendix B: Forms 475
This Appendix contains sample forms which can be used by practitioners as a starting point
for drafting their own forms for various clients and situations.
Checklist: Drafting the Beneficiary Designation
Here is a checklist of “DO’S and DON’T’S” to consider when drafting a beneficiary
designation form for a client’s retirement plan benefits.
1. DO impress on the client that the Beneficiary Designation Form is just as important a legal
document as a will or trust. Often, more of the client’s assets are controlled by this form than by
his will. An improperly drafted (or missing) beneficiary designation form could cost the client’s
family dearly in taxes and increased settlement costs.
2. DO read the applicable sections of the account or plan documents, to make sure the
beneficiary designation and payout method the client desires are permitted. In the case of a
qualified retirement plan (QRP) benefit, read the Summary Plan Description or the description of
available benefit payout options in the employer-provided beneficiary designation form, then
check your conclusions with the plan administrator. In case of doubt read the actual plan
documents. Consider, when you quote a fee for a “standard” estate plan, including in the quote the
cost of beneficiary designations (including reading plan documents) for up to two retirement plan
accounts per client. If the client chooses to have (or for some reason is stuck with) multiple
accounts, advise the client of your fee to review the documents and prepare a beneficiary
designation form for each additional plan.
If tempted to skip this step, ask yourself with respect to each plan, how bad would it be if
this plan does NOT go to the right beneficiary in the right way? You will quickly realize that plans
worth hundreds of thousands (or millions) of dollars must be thoroughly taken care of, even if that
means reviewing plan documents and multiple communications with the plan administrator, while
the client will probably agree that it is not cost effective to have you apply the full court press to a
$1,000 IRA.
3. Can the IRA beneficiary transfer the benefits to another inherited IRA? Most IRA providers
routinely allow this, but if your client’s IRA provider does not it would be nice to know about that
policy up front. Se and Section 3.01 of the IRA/RothIRAMaster Beneficiary Designation
Form (Form 2.1). (This is not a concern with respect to qualified plans. QRPs are required to allow
Bombs Hidden in Plan Documents
The author has seen a bank’s IRA beneficiary designation form that contains the
statement “I understand that if I become married in the future, this form ceases to apply and I
must file a new beneficiary designation.” The client may not be aware that marriage has that
effect. Some IRA providers require spousal consent to the beneficiary designation even if the
spouse has no rights under applicable state law.
Also, many lawyers build an estate plan around the expectation that the primary
beneficiary (e.g. the surviving spouse) may disclaim the benefits and allow them to pass to the
contingent beneficiary (e.g. a credit shelter trust). But some qualified retirement plans do not
recognize disclaimers—the plan will pay the benefits to a named beneficiary who survives the
participant regardless of whether the named beneficiary disclaims the benefits. Se