Quick question: When is the last time your financial professional sat down with you to review your beneficiary designations? If it’s been ANY longer than 12 months, quite frankly, you should be concerned. Why? Because circumstances have a mysterious way of changing, and failing to maintain current, accurate beneficiary designations can be one of the most costly financial mistakes you could ever make.
One of the most poignant examples of this mistake comes from an article in the New York Post. The story tells a twisted tail of Anne Friedman’s nearly million-dollar pension. Anne was a lifelong New York City school system employee. In 1974, Anne named her mother, uncle and sister on her beneficiary form with the Teachers’ Retirement System. A year later, Anne met and married Bruce Friedman to whom she was happily married for the next two decades.
During her entire marriage, Anne never updated her beneficiary designation. At her death, Anne’s sister was the sole surviving beneficiary of Anne’s retirement plan and only her sister had the right to receive Anne’s pension money. Anne’s sister exercised her right, took nearly a million dollars of Anne’s pension and left Bruce with
nothing. Bruce sued, lost, appealed and lost again.1
CLICK HERE for a closer look at this “Pension Pickle.”
The moral of the story? Keeping your beneficiary designations current – especially after a life-changing event such as marriage, divorce or the birth of a child – is absolutely critical. Here are just few additional examples of common situations that could create very undesirable outcomes.
Roger & Leslie divorced after nearly 15 years of marriage. Both eventually remarried, but Roger failed to update his designations and replace Leslie with his new bride. At his untimely passing, Leslie received over $400K from his IRA and roughly $300K in proceeds from a life insurance policy that still had her named as the sole beneficiary.
Walter was a 62-year old doting grandfather. When he last reviewed his accounts nearly 8 years ago, he had two grandchildren. He named these boys the beneficiaries of an IRA he’d always earmarked for his grandkids. Walter’s daughter later had twin girls, but because he failed to ever review his designations, they were never updated, and the twins never received an equal share of his account as inheritance.
Veronica and Jim had been married for over 25 years. Childless, they had each designated each other as the sole beneficiaries of each other’s retirement accounts and small life insurance contracts. Jim predeceased Veronica, but her designations were never updated, and at her passing, over $800K became part of her taxable estate rather than passing on to a secondary beneficiary.
Each of these is an outcome that could’ve easily been avoided with a simple, annual review of the individuals’ beneficiary designations, and if you haven’t sat down to review yours in the last year, the time is now. To schedule a complimentary Beneficiary Designation Review, simply call us at (704) 553-0123 or visit us at www.ChrisHobart.com today!
These are hypothetical examples and are for informational purposes only.
1 “Pension Pickle.” New York Post. January 31, 2005.