Many people today are experiencing significant and sometimes sweeping changes in their family situations. Perhaps a recent divorce, separation, or marriage. Or, your children have moved out on their own and perhaps have a new relationship of their own. Maybe someone in your family recently passed away. Changes in any type of family situation could be a very important trigger to review your beneficiary designations.
This point is emphasized in a recent decision by the U.S. Supreme Court. In this 2009 case (Kennedy v. DuPont Savings and Investment Plan), a spouse divorced in 1994 was awarded all rights to her ex-husband’s retirement plan benefits (in a dispute with his daughter) even though the ex-wife had waived all claims to the benefits in the divorce decree. The problem is that prior to the the death of her ex-husband in 2001, he had failed to change the beneficiary named in the plan documents. Thus, all of his $400k in retirement benefits went to his ex, and none to his daughter. Ouch. Talk about unintended consequences! (source: www.gotoretirement.com)
Even though you may update your will and make changes, your beneficiary designations will override what you put in that will. In order to have a smooth transition of your assets, you should consider having both a primary and a contingent beneficiary designation. Review these designations yearly in your overall financial plan as your overall financial picture changes.
If you haven’t done this in several years, make sure to add this to your holiday activities! You might also want to check out these for the New Year – Long Term Care Insurance . . How Does It Work? , Save More For Retirement? 401(k) Limits, Social Security – Take it Now Or Later? , What do you do when you lose a spouse?
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