Not keeping tabs on beneficiary arrangements can cause heartache

On our Queens probate and estate administration blog, we talk frequently about the necessity of getting one’s affairs in order. Making sure that our estate is in order by taking the necessary steps can ease the estate administration process after we’re gone. One thing in particular that people need to pay attention to is the beneficiary arrangements on accounts such as individual retirement accounts, such as IRAs.

The case of one man who died in 2009 can serve as a cautionary tale. The man, who had a daughter from a previous relationship, had a long-time girlfriend whom he never married. When the couple broke up in 1998, a judge divided their assets, even though they weren’t married. In exchange for a settlement saying she had no right to the man’s retirement accounts, he was able to remove her as a beneficiary on his will. However, he did not ever remove her as the listed beneficiary on his IRAs.

As a result, when he died, his former girlfriend was in line to receive the money. The man’s daughter sued, saying that the money wasn’t intended for the ex-girlfriend. However, a state court sided with the ex-girlfriend, saying that the instructions the man had left before his unexpected death did nothing to change that beneficiary designation.

It’s not uncommon to have a need to change beneficiary designations; life throws us curves all the time. However, when this happens, it’s important to take stock of these events because of how they could affect our family’s financial future.

Source:  Oregon Live, ” It’s Only Money: The dangers of neglecting your beneficiary designations ,” Brent Hunsberger, March 22, 2014