Sheryl J Moore

By Michael Ham

January 26, 2012

Thank you Ed Slott for your tireless work in educating us on IRAs, their benefits and
their near misses. But for the agents and reps who don’t want to spend three
days and several thousand dollars in a workshop, here is the key to making you
an invaluable IRA resource for your clients and prospects. Share the stories of
unaware families who thought their parent’s or spouse’s IRA would automatically
pass tax free to their IRA, because they don’t.

My most recent experience with a new client is just another nightmare whereby the
wife figured her deceased husband and their estate attorney had all the details
worked out in their IRAs. And I suppose their plan was copacetic back in 1999
when it was drafted. But news flash! The custodian (aka banks and brokerages) have
gone through tumultuous times and there have been untold numbers of mergers and
sales of banks, insurers and firms over the past few years, often
unintentionally negating prior estate planning.

In this case, the firm that was once the custodian of my new client’s IRA was
acquired. And even though their IRAs held by the acquired firm named the
spouses as each other’s beneficiaries, the firm’s custodian was the owner “for
the benefit of” (FBO) the clients.

OK, still no problem except that the beneficiary of the annuities owned “inside”
the IRAs was named (per the custodian’s requirements) as “Same as Owner.” Is
that a big deal, you may ask? Heck, yes! When the prior firm was sold, the
annuity contracts’ ownership was transferred back to the clients. Thus the
beneficiary wasn’t changed and still named the owner, not the spouse nor any
other contingent beneficiaries. The result? The deceased husband’s estate
became the beneficiary, which nullified any opportunity for the wife to
“inherit” or simply roll over his IRA into hers. And income taxes were due now
on a very large IRA that could have and would have been deferred for at least
10 years.

Having to pay income taxes on her spouse’s IRA now and being unable to inherit it into
her IRA reduced the principal of the account by 33 percent. Her lifetime annual
income was also cut from $30,000 to $20,000. This is so easily avoided by
simply naming both a real human being primary beneficiary along with multiple
human contingent beneficiaries. Sharing these types of real life stories with
your clients and prospects will increase your value and your odds of uncovering
assets held under management with inept competitors.

You’ll be shocked to learn how many IRAs held at banks
and other firms name the beneficiary as “per stirpes,” or often a revocable trust. Without actually naming beneficiaries “with a heartbeat,” the IRA is forced back through the
probate process and becomes part of the deceased estate. This costs money in
legal fees and negates the ironclad protection against predators and creditors
afforded to IRAs and their beneficiaries. Your call to action as a skilled
professional is to offer all your clients and prospects the information and
ability to review their IRA beneficiaries. Hey, I wonder if I can get my own
PBS show?

About the Author

Michael Ham

Michael
Ham is the founder of the revolutionary and successful coaching sales system
found at www.TheSalesTalk.com.

Originally Posted at LifeHealthPro on January 26, 2012 by Michael Ham.