Are you leaving your pension to the right person? [VIDEO]

Estate Planning

Deciding whom to leave your money to can be a tough decision. If you are married, then it will most likely go to your spouse. If you have children, then they may be next in line. But even simple scenarios like this can be filled with details that can derail these plans.

In this video, we uncover some nuances that should determine how you word your beneficiary designations, and Estate Planning documents. While I don’t practice law, these things should be discussed with your attorney when you are deciding how to bequest your money.

If you are questionning whether you have set up your accounts correctly, we’d be happy to review them for you.

Take a look:



So you’ve worked hard your whole career ensuring that children become educated. As a benefit for this work, you can receive a pension when you retire. Now, it may look different to how you expected it to be, but it’s going to be there. But what happens if you pass away and your survivors become eligible for benefits as well? Will it happen the way you want it to?

Now, beneficiary designations can be somewhat a minor part of the plan because they’re not going to affect you in your lifetime. However, if they’re not done correctly, they can have a big impact on your dependents. These people that survive you may not have a comfortable time if you don’t do the correct job today.

So, let’s look at some things that you should do to make that journey more comfortable.

So, here is the first tip. After every major life event, review your beneficiary designations. You may have beneficiary designations on your pension, on life insurance, on other insurance products, and on retirement accounts. Chances are, in these life events (for example, they can be marriage, divorce, death), there could be people listed on those accounts that it is no longer applicable that they’re there. So, review it. Make any changes if necessary, and then move on.

The second tip. The wrong type of beneficiary is listed on your accounts. Now, here is where it gets a little complicated. For a lot of accounts, you can list people, or you can list trusts (and for some estate planning reason, sometimes it’s better to list a trust than it is for an actual person). Don’t make that mistake with your pension.

If you list a trust as a beneficiary, the only people that can be beneficiary of that trust are a dependent child at the time that you die, or someone who is disabled. That’s the only type of people that will get paid the monthly benefits if they’re a beneficiary of that trust. If it’s your three children who are the beneficiary of that trust, they will not get the monthly survivor benefits.

Now the third situation (and here is something I come across somewhat frequently) is there’s no beneficiary listed. Now, sometimes it’s getting harder and harder to do this now because if it’s a retirement account, you have to list one if you want to open that account. If it’s your pension, TRS has now incorporated a default that is going to be your spouse, or your dependents.

But what if you don’t want it to be your spouse? What if you just want your pension to go straight to dependents?

If you haven’t got it listed, it’s not going to happen. So you have to make sure that you’ve put down your wishes and your beneficiary designations.

Now, the fourth thing, and this again is a little complicated and it’s just the life occurrence that happens that starts to make things get messy. It’s when you have two different types of people listed as the primary beneficiary.

So, let’s do this as an example.

Mary’s a teacher and she has two children. She’s not married. She has a 17 year old daughter and a 5 year old son. Ten years move on and she retires, but she passes away immediately. When she was teaching, her children were dependents. Now, here daughter who was 17 is 27 and married. She’s no longer a dependent. Her 5 year old son is now 15. He’s still a dependent.

Now that she has beneficiaries listed that are of two types (a dependent and a non-dependent beneficiary), that’s when the mess comes in.

In that type of situation where there are two different types of beneficiaries (in this case, a dependent and a non-dependent), there is no option to have the monthly survivor benefit paid out. It has to be a lump sum.

So, in the case of Mary and her children, her 15 year old son is now going to get a lump sum of cash. And who knows what’s going to happen then?

So that covers some of the major things that I see, and some of the things that can cause problems. There are other intricacies that come in that can cause problems as well. For example, if you’re a blended family, how does that happen? How do you leave it and split your pension between two different sets of kids, if that’s the case?

What happens if you’re a young teacher? There are certain provisions in a pension that do not pay out before the age of 50. There are lots of these different clauses in the TRS pension plan.

If you’re looking for more answers, or if you want to go in to a more detail, we’d be happy to help.