A holding by the U.S. Supreme Court in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, et al. makes clear the importance of keeping on top of estate planning matters.
In that case, a divorced father did not take all of the steps necessary to change with is pension plan the name of the beneficiary of his plan. When he died, the pension plan paid all of the benefits to the person named as the beneficiary. That person was his ex-wife. The father’s estate sued, claiming that it should have received the benefit because the ex-wife had waived her right to receive the benefit.
The law in that state held that a divorce ends the right of a spouse to an interest in the other spouse’s pension benefits.
A trial court ruled that the estate should receive the benefit. The 5th U.S. Circuit Court of Appeals reversed and ruled that the ex-wife should receive the benefit. The U.S. Supreme Court confirmed.
When naming beneficiaries, it is good to keep the following in mind:
- It is easy to change beneficiaries. Most financial firms make copies available online or you can call and ask for them. The forms are simple. Once completed it is good to make a copy of the form after submitting it and include the form with other estate planning documents;
- Name an alternate beneficiary. This addresses the situation where the primary beneficiary dies before you do. It also provides for the instance where the primary beneficiary disclaims the interest.
- Your will has no effect regarding who receives accounts with beneficiary designations like IRAs, 401(k)s, insurance policies and annuities. Be sure to update these beneficiary designations.