Dear Liz: While helping a 95-year-old auntie after she moved, I found out she designated her revocable trust as the beneficiary for her IRA accounts. Her trust specifies 17 beneficiaries. Is Auntie setting up her trustee for more headaches than necessary? We were told when we set up our own trust not to put the trust as the IRA beneficiary, but to designate beneficiaries for each IRA account. I’d like to make it easier for my cousin to handle when the time comes. If it’s better to specify the beneficiaries for each account, one of us will likely need to help her do that.
Answer: The advice you got was generally correct, but estate planning gets so complicated so fast that there are few, if any, “one-size-fits-all” answers.
Naming a trust as the IRAs’ beneficiary can provide more control over how the money is distributed. That can be useful when there are numerous beneficiaries or when some need help managing an inheritance because they’re minors, have disabilities, struggle with money management or need protection from creditors. The trade-off is added complexity and administrative work for the trustee, along with potentially less favorable tax treatment of IRA withdrawals, depending on how the trust is structured.
Maybe the trade-off seemed worthwhile when the trust was first created, but that may no longer be the case. So the question to ask now is whether Auntie’s estate plan has been reviewed recently by an estate planning attorney.
Estate plans should be checked by an expert every three to five years, and after every major life event. Laws can change. Beneficiaries can die, relationships can change and people’s wishes about how to divide their estates can evolve. These reviews are also a great time to make sure that the people named as executors, trustees and agents are still willing and able to serve.
Dear Liz: This is regarding the reader whose credit score kept dropping. You recommended checking their credit reports.
When requesting a free annual credit report, don’t request from all three credit bureaus at the same time. This will produce the same info in triplicate and prevent you from another review for a year. My suggestion is to spread your requests over the year, enabling you to have three opportunities to determine if anything is amiss, such as an unauthorized new account.
Fraudulently opened accounts are typically kept current for a short period of time, then maxed out and abandoned, resulting in a charge-off that lowers a credit score. Usually, a victim doesn’t become aware of this until they apply for credit such as a re-fi, auto loan, or a new credit card. Regular credit monitoring is also offered by many financial institutions, allowing customers to stay aware of their credit history.
Answer: The advice to spread out requests of your credit reports made sense before 2020, when you were allowed to access them only once a year for free. Today the three major credit bureaus — Equifax, Experian and TransUnion — offer free weekly access to credit reports at AnnualCreditReport.com, the federally mandated site. There’s no longer any need to wait months between checks.
The three bureaus are independent, private businesses and not every creditor subscribes to all three, so your credit reports can differ depending on the bureau. That’s why it’s important to check all three regularly.
Dear Liz: Thank you for your recent column about helping older adults pay bills, and especially for highlighting daily money managers (DMMs) and the American Assn. of Daily Money Managers (AADMM). My practice focuses on older adults, particularly those aging alone or whose children live far away. For example, I help a 97-year-old Santa Ana woman whose daughter lives in Arizona. I handle bills, mail, financial paperwork, insurance documents and recordkeeping so nothing important gets overlooked. Her daughter can spend visits enjoying time together rather than catching up on paperwork.
This support gives families peace of mind and helps older adults maintain their independence. With our aging population growing, the need for these services will only increase.
Answer: Scattered families and the growing number of people aging alone mean many people are looking for exactly the type of service you provide.
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Liz Weston, Certified Financial Planner, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.
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