Your Estate Matters
Don't let your largest assets end up in the wrong hands
YOUR IRA, 401(k) or other retirement plans may be your largest assets. While you likely know who the beneficiaries of your will or trust are, do you know who you have named as the beneficiaries of these retirement plans?
If you don't remember, that's not surprising, since you may have made your choice years ago and you may not even have a copy of your retirement plan beneficiary form.
It was one of the forms you signed when you started your job, or opened your IRA.
Most of the time, your beneficiary designation continues as is unless you change it with the plan custodian or administrator as the plan document requires.
MANY people think they know what will happen with their IRAs and other retirement plans when they die -- but many wrongly assume, instead of finding out for certain.
Not knowing the facts can mean disaster for your spouse and family.
Here's a case study to illustrate this point:
Anne Friedman worked for the New York City school system for many years. Prior to her employment there, she had worked as a public school teacher and named her mother, uncle and sister on her beneficiary designation form.
In time, she married Bruce Friedman and continued teaching. Their marriage was a long and happy one for almost 20 years, and Anne retired as a principal.
When Anne died, Bruce expected to inherit the $900,000 in her retirement plan assets and needed this to fund his own retirement.
During her career, Anne had periodically received account statements from the New York Teachers' Retirement System stating that she had no beneficiary designated.
Bruce, as her spouse would have gotten her retirement funds if she had no beneficiary listed.
Upon Anne's death, however, the retirement system found Anne's beneficiary designation listing Anne's mother, uncle, and sister. Over the years, Anne's circumstances had almost completely changed.
Anne's mother and uncle had died and she had married and lived with her husband for nearly 20 years. With Anne's mother and uncle deceased, her sister was the sole surviving beneficiary on the beneficiary form Anne had filled out 27 years earlier. Anne had never changed the beneficiary designation.
Bruce challenged this result in court and lost. He lost again on appeal. The courts found that the beneficiary designation remained valid. Bruce was out the $900,000 and Anne's sister received a windfall.
Many assets transfer at death by beneficiary designation. Some of these assets are:
» Life insurance;
» Bank accounts.
As in the situation with the Friedmans, unintended beneficiary designations can ruin your intended estate plan.
IT'S best to review your beneficiary designations every few years, and change them to match your current wishes and circumstances.
Follow the rules of the institution holding the funds to make a successful beneficiary change.
A qualified estate planning attorney can help you with your beneficiary designations as part of your total estate plan so that all parts of your plan are coordinated.
Life changes, and it's easy to forget past choices. Checking up on your designations can reveal problems long before they become irrevocable for you and your family.
Attorneys Judith Lee Sterling and Michelle H. Tucker, of Sterling & Tucker, can be reached through www.sterlingandtucker.com
or by calling (808) 531-5391.