I wrote about beneficiary designations once before in this post. And yet there is a common comment I hear . . . “when is it actually a problem if your beneficiary designation isn’t changed . . . the rest of your estate plan will sort it out.” Well, that’s not true. Having beneficiary designations on retirement accounts, life insurance and other similar assets “match up” with the rest of your estate plan is critical to having the plan work the way you want. And if you haven’t done estate planning (other than Michigan’s default law plan for you), beneficiary designations are equally important.
With that in mind, here is an example of a “real life” situation that turned out WAY different than the parents expected (I’m sure)! It is the case of Kennedy v. Plan Administrator for DuPont, which was decided recently in 2009. Certainly you didn’t think beneficiary designations would be important enough to go all the way to the U.S. Supreme Court, right? Well, they are! Although there is more detail in the opinion, the short version goes like this.
Dad had invested in his employer’s Savings and Investment Plan (SIP) for some time. His wife was named as beneficiary. They divorced. In the divorce agreement, his wife relinquished all claims to his company benefits. Dad, however, did not change the beneficiary designation on his account in his employer’s SIP. Dad died several years later with about $400,000 in the plan. The employer paid all the money to his Dad’s ex-wife, who was still the designated beneficiary. Dad’s estate sued the employer to recover the funds that they felt should go to the estate according to the divorce agreement, his estate plan and state law. The Supreme Court unanimously ruled for the employer.
Dad’s failure to revisit his beneficiary selections thwarted his estate plan and effectively disinherited his daughter from what she likely would have received had he made the change.
And THAT is a great example of how important beneficiary designations are. And even moreso, it shows how important it is to work with a Michigan estate planning lawyer who will regularly followup with you to make sure the necessary changes are made and that your estate plan continues to follow your wishes as they change throughout life . . . not just when you initially created the plan. That is truly creating a legacy for generations to come. Remember, you get what you pay for (maybe) and you pay for what you get.
Ready to make sure your wishes are followed throughout life and not just the short term? Call us at 616-827-7596 to schedule a Peace of Mind Planning Session. Mention this blog post and get a special gift.
Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™. This goes beyond merely planning for finances – it’s about who your are and what’s important to you. He focuses on estate and asset protection planning for the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses and pet planning. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.