Saturday, September 28, 2013
Turning in designated beneficiary forms can avoid a lot of unneeded estate administration drama. On the other hand, not doing so can lead to serious consequences. Recently, Morning Star Advisor published a couple of horror stories for people who did not update their beneficiary forms. In one case a man died and his ex wife was given his pension and life insurance proceeds. His children from an earlier marriage received nothing because he did not update his designated beneficiary forms. The court in that case held that the forms preempted state law that would have disinherited the ex wife.
In another case, an ex wife received almost $400,000 from her ex husbands company savings despite the fact that she had specifically waived any interest in the plan in the divorce decree. Divorce is a common situation where designated beneficiary form can be a problem, but it is not the only situation. It can also be a problem when circumstances change your intended heirs. People should not depend on their will to supersede beneficiary forms because generally the name on the most recent form will receive the money despite a conflicting statement in a will.
See Bill Bischoff, Don't Make this Common Estate Planning Error, Morningstar Advisor, Sep. 17, 2013.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.