Update Your Beneficiary Designations
Failure to update one's beneficiary designations for life insurance, annuities and retirement accounts is all too common. One of the more common problems stems from not changing beneficiary designations after a divorce. The law does not automatically cancel beneficiary designations in favor of a former spouse. This can cause a major disruption of one's estate plan, have unintended tax consequences and create conflict among family members.
Earlier this month the United States Supreme Court heard oral arguments in the case of Kennedy v. Plan Administrator for DuPont Savings. This case involves a deceased father who never changed his retirement plan beneficiary after his divorce, and has pitted daughter against mother (the ex-wife).
Here is an excerpt from the Legal Information Institute Bulletin at Cornell University Law School:
"[T]he Supreme Court will determine whether a divorcing spouse must obtain a Qualified Domestic Relations Order to waive the right to receive an ex-spouse's pension benefits under the federal Employee Retirement Income Security Act ("ERISA"). A decision upholding the Fifth Circuit will make Qualified Domestic Relations Orders ("QDRO") the only method by which an ex-spouse can waive rights to pension plan benefits, while a reversal would permit voluntary non-qualified waivers as well. In either case, the Supreme Court's decision will impact pension plans, their employee plan members, and beneficiaries. "
Other common problems are naming minor children as beneficiaries, or not naming a new spouse if such is desired.
So, please check all of your beneficiary designations, and update them if necessary. If you have any questions about the best way to handle the designations, consult with an estate planning attorney. And finally, make sure that your designations are acknowledged by the institution!
