Update Your Beneficiaries
Here’s a slap for all of us who let things slip through the cracks, like updating beneficiary information on your life insurance or retirement account.
If you’re like most people, leaving 401(k)s at former employers and having IRAs all over the map, this one’s for you.
This is a nasty trap that gets sprung after you pass. Sometimes, your heirs get a big surprise.
The wife of my friend Tom designated him as the beneficiary on her pension when they were married. They were divorced 15 years ago, but her current family was entitled to nothing after her death.
He got the nice “surprise” when he was contacted to sign paperwork to begin receiving her survivor’s pension benefits. But her family, who by right of reason should have received it, did not get it, and the courts wouldn’t even hear their case.
Another person I know got a seven-figure check from a life insurance policy a former husband had taken out. They hadn’t been together for years; he had just never changed his beneficiary.
That was a big one.
But for every person who got a check they probably shouldn’t have, there is the other side of the equation: those who expected it and probably should have gotten it, but didn’t. That’s when it can get really nasty.
There are lots of stories about spouses getting nothing from life insurance and retirement accounts because the person who passed forgot to change those two little lines: primary and secondary beneficiaries.
The courts have made it abundantly clear that those two lines decide who gets the cash. If they aren’t listed as official beneficiaries, it doesn’t matter if your spouse or children are in dire need.
Even when a spouse has explicitly waived the right to any life insurance or retirement benefits in a divorce settlement, the courts have awarded the funds to those whose names were on those two lines.
In one case, a court described the beneficiary information as hideously out of date, but the name on the line still got the bucks.
Also, don’t forget about the second line, which refers to your secondary beneficiary. If your primary beneficiary has passed away, that second choice (which I always had trouble making) holds up in court just like the primary.
In most cases, we’re talking about all the money you have in the world. If you want to be sure your ex doesn’t get it, update your beneficiaries.