A recent article in the Wall Street Journal serves as a good reminder of the importance of creating and also revisiting your beneficiary designations.
Typically, when you buy life insurance, sign up for employer-paid life insurance or open a retirement account, you’re asked to designate either a person or entity to receive the proceeds after you pass away. Payable on death or transfer on death designations are also available for other types of assets, like bank accounts.
Often these designations are made when the account or policy is established but then they are forgotten, which is exactly what happened in the Wall Street Journal article. In the story, a man listed his then-girlfriend as his beneficiary on his retirement account back in the 1980s. They broke up in 1989, but he never changed the beneficiary designation. When he died in 2015 as a single man, that account was worth a million dollars and guess who stepped up to collect? The former girlfriend. Now the man’s siblings are fighting to keep the money with the estate, but so far, they are losing that fight in court.
There is a common misconception that if you have a will, it is the ultimate directive on who should inherit your assets. However, in most cases, the beneficiary designation trumps the will, even if it was filled out decades prior and possibly not the owner’s current wishes. This is why it is so important to stay on top of your designations and to make sure they align with your estate planning documents.
You can start by updating your beneficiary designations when major life events happen. Typically, this would be following things like marriage, divorce, the birth of a child or the death of a current beneficiary. Outside of these events, it’s a good idea to review your beneficiaries every few years.
As in the story we talked about, family members can challenge these designations when someone passes, but it can be a long and expensive process, with no guarantees, so it’s best to make sure they are correct while you are still living.
Read the WSJ original article here:
His Ex Is Getting His $1 Million Retirement Account. They Broke Up in 1989. – WSJ
By Ashlea Ebeling
June 8, 2024 7:00 pm ET
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