Most people do not realize the power of beneficiary designation: Your beneficiary designation may result…
I bet you thought that this column was going to be about taxes—fooled you!
Just when you thought that the government could not get any more intrusive and over-reaching, we now learn that Pennsylvania is the first state to make it easier to deem retirement accounts abandoned, allowing them to be turned over to the state as unclaimed property.
For years there have been laws that have allowed states to seize abandoned property through a process called escheatment. The initial reasoning for these laws were sound: Property may become lost, and the state could use its resources to locate the rightful owner. Like many laws that are originally enacted for good reasons, over time, they can morph into something much different. Today, states are greedily eyeing unclaimed property as a way to supplement their tax revenue.
States previously were required to wait until the retirement account owner reached 70 ½ years of age before commencing the escheatment process, but Pennsylvania is the first state to remove this age restriction. According to the Investment Company Institute, you can avoid having your property seized by the state by abiding to the following guidelines:
- Sign on or contact each financial institution that you do business with at least every 3 years.
- Ensure that the contact information (e.g., name, address, phone number, and email address) that you have provided to each of you financial institutions is current.
- Cash dividend checks that you receive.
- Vote any proxies that you receive.
- Maintain a list of all financial accounts with names of institutions and account numbers so that a family member can act on your behalf if you become disabled or die.
These guidelines emphasize the importance of consolidating financial accounts to the highest degree possible. The more consolidated your financial accounts, the easier it is to monitor and manage them. From an estate-planning point of view, you should maintain a list of financial institutions for the person who will act as your financial power of attorney or executor…and of course you need a durable power-of-attorney and a will!
This a just one example of how a personal financial management relationship with a comprehensive and fee-only, independent firm can assist you so that the state can never take your money and you can be fully prepared for major life events.