If you're finally getting around to writing that will or just
doing the periodic review, don't forget to check your named
beneficiaries on other documents.
If you don't, your assets might not wind up where you want
after your death.
That's because some assets go to beneficiaries you've named in
individual account documents. Those trump whatever is in your
A worker named John Hunter participated in his employer's
retirement plan. He named his wife as beneficiary, but no
After she died, Hunter did not name a replacement beneficiary.
Then Hunter died without anyone designated to inherit his
Hunter's company plan had a formal procedure for deciding who
will inherit in such cases. A surviving spouse would be first
Then would come surviving children, parents and siblings, in
that order. Hunter had no surviving children or parents, so the
plan administrator divided Hunter's account, worth over $300,000,
among Hunters' siblings.
But Hunter had two stepchildren from his marriage. He left his
estate to them in his will. So the stepsons sued to get Hunter's
retirement account. They won one court victory but lost on
The appellate court held that the plan administrator acted
properly. Plan documents did not say that stepchildren were
beneficiaries, and they could be excluded.
"This shows the importance of beneficiary designation forms,"
said Beverly DeVeny, a consultant with retirement expert Ed
The Right People
To be confident that your
will go to the right people, you should name a secondary as well
as a primary beneficiary and review the form periodically.
The ruling on Hunter's plan echoed a unanimous Supreme Court
decision. A corporate employee had been divorced, and his wife
waived her interest in his company retirement plan as part of the
But the divorced employee never changed the plan's beneficiary
designation. He died years after the divorce and the plan paid
out the money to his ex-wife, who was still named on the
The employee's estate sued and lost in the Supreme Court. "The
documents control," the Court noted. And that's the message you
should keep in mind.
The types of accounts and plans steered by this rule include
life insurance policies because death benefits go to named
beneficiaries. The same is true for annuities, IRAs and other
Some bank and investment accounts are payable-on-death or
transfer-on-death. Their balances go to the named beneficiary. Be
sure they reflect your current wishes.
When accounts or insurance proceeds pass to a designated
beneficiary, probate isn't involved, which can save your estate
or heirs time and legal costs.
Insurance policies and accounts with beneficiary designations
often hold sizable amounts. Leaving these assets outright to a
loved one might not be a wise choice.
Things to consider before you do include whether the
beneficiary is a spendthrift, who'll fly through an inheritance.
Or that person might not be able to make savvy financial
If you have such concerns, consider naming a trust as the
account or policy beneficiary. A trustee can protect your loved
one, the beneficiary, as well as provide cash flow.
For retirement accounts, some trusts can stretch out required
minimum distributions over an individual's life expectancy.