Between work and personal commitments people get pretty busy. Sometimes there just doesn’t seem to be enough time in the day to get everything done that makes it onto the “to do” list. Sometimes even the important things sit on the list without being checked off. It gets delayed until tomorrow, next week, next month and eventually…someday.
The difficulty is that someday might never actually arrive – with tragic results when the “important task” that is put off indefinitely is something as vital as updating your beneficiary designations. If you need to change the beneficiary for a policy or other plan here are a few tips:
- Use the plan’s official beneficiary form rather than depending on an indirect method of updating the beneficiary (like designations in other documents in your estate plan or legal proceedings).
- Do it immediately. It’s extremely important to keep your beneficiary designations up to date. Divorce, marriage, adoption, and many other life changing events can leave beneficiary designations made “years ago” hopelessly outdated.
For those who aren’t yet sure that updating beneficiary designations is extremely important, consider the case of William and Liv. William passed away leaving a $400,000 employer-sponsored retirement account behind. He named his wife, Liv, as his beneficiary shortly after they were married. The couple’s marriage lasted for 20 years, but at that point, they divorced. In the divorce decree, Liv’s right to benefit from this specific retirement account owned by William were waived. William never changed his beneficiary designation form with his employer.
When William died, Liv was still listed as the beneficiary for the account, so the plan paid the $400,000 to Liv. William’s estate sued citing the divorce decree and Liv’s waiving of rights to the account, but the Court disagreed. They ruled that the plan documents that specified that the beneficiary be designated and changed in a particular way out-ruled the divorce decree because the original designation of Liv as William’s beneficiary on the account was done in the way that the plan required, while the waiver of Liv’s rights to the account were not.
The above story is a retelling of an actual case heard by the U.S. Supreme Court (Kennedy v. Plan Administrator for DuPont Sav. and Investment Plan, 555 U.S. 285 (2009)) and it could have been avoided entirely if William had simply updated his beneficiary designations as required.
If you have questions or concerns regarding estate planning in California or how to update your beneficiary designations to avoid confusion and tragedy, please get in touch with one of the experienced California estate planning attorneys at The Law Office of Janet L. Brewer.