Q: My husband of 20 years past away. His estate is going through probate now. Can his ex-wife be entitled to something? She now claims that she owns all the assets in his IRAs and 401K, totaling $2,000,000. Is this LEGAL?
A: Yes. Many people do simple wills before their death and do not seek advice of professional Estate Planning attorney. As a result, they forget about such important assets in their estate as IRAs, 401K(s) and other retirement accounts.
Independent of your intentions, such as seeing the assets distributed to your wife and children, custodians of retirement accounts must follow the directions of the beneficiary designation form - even if that means that $2 million of the assets legally go to an ex-wife from 20 years ago.
Q: What should I do to make sure correct beneficiaries inherit all of my estate?
A: Consult with an Estate planning attorney prior to divorce, marriage, birth of a child and other important life changing event. Many divorce attorneys do not draft separation or divorce documents properly often forgetting about very important assets that by law belong to your current spouse. Such assets are your IRAs, 401(k)s, pension plan accounts and others. If you designate someone other than your spouse to inherit such assets, you need your spouse's permission! If you get divorced from that spouse, you must properly remove such spouse from those assets.
Most important advice any good attorney can give you - review your estate plan including your beneficiary designations annually and during important changes in your life. And for once, let the professional handle your estate planning needs!
Monday, July 26, 2010
An Inheritance Shocker - Retirement Account Beneficiaries
Do you want your spouse to inherit the money in your 401(k) — or do you want your former spouse to get it? If you are divorced, remarried or have children from a previous relationship, make sure you have updated the beneficiary designation for your retirement plan at work. Otherwise, your spouse or kids could be in for a shock.
A shock is exactly what William Kennedy gave his daughter, Kari. The elder Kennedy married Kari’s mom in 1974 while working for DuPont. He named his wife as the beneficiary of his 401(k), and with no children at the time, he left blank the contingent beneficiary (who would get the money if the wife died first).
When the couple divorced in 1994, his ex-wife agreed to relinquish any rights to the money in the plan so that Kari would receive the money. But William did not sign new papers at work to officially change his beneficiary designation. So when he died in 2001, DuPont gave his ex-wife the proceeds — $400,000.
Kari sued DuPont, arguing that it violated the divorce decree by giving the money to her mother. The case made it all the way to the Supreme Court, which recently ruled in favor of DuPont. The majority ruled that DuPont acted in accordance with ERISA, the law governing retirement plans, which stipulates that beneficiary designations trump all other agreements.
The lesson: It’s not enough to sign a contract or write a will. If you want someone to be the heir of your retirement plan at work, you must stipulate your instructions in the trust documents. Have you done your Estate Planning lately? Have you reviewed your beneficiary designations lately to make sure that the people you want to get your money are really the people who will get your money? If you haven’t done so recently, go to your attorney and do your Estate Planning properly.
Footnote: The court noted that Kari could sue her mother based on the divorce agreement, but that won’t do her any good. She told her hometown newspaper The Enterprise that her mother died in 2007 after moving to Norway and spending all the money.
A shock is exactly what William Kennedy gave his daughter, Kari. The elder Kennedy married Kari’s mom in 1974 while working for DuPont. He named his wife as the beneficiary of his 401(k), and with no children at the time, he left blank the contingent beneficiary (who would get the money if the wife died first).
When the couple divorced in 1994, his ex-wife agreed to relinquish any rights to the money in the plan so that Kari would receive the money. But William did not sign new papers at work to officially change his beneficiary designation. So when he died in 2001, DuPont gave his ex-wife the proceeds — $400,000.
Kari sued DuPont, arguing that it violated the divorce decree by giving the money to her mother. The case made it all the way to the Supreme Court, which recently ruled in favor of DuPont. The majority ruled that DuPont acted in accordance with ERISA, the law governing retirement plans, which stipulates that beneficiary designations trump all other agreements.
The lesson: It’s not enough to sign a contract or write a will. If you want someone to be the heir of your retirement plan at work, you must stipulate your instructions in the trust documents. Have you done your Estate Planning lately? Have you reviewed your beneficiary designations lately to make sure that the people you want to get your money are really the people who will get your money? If you haven’t done so recently, go to your attorney and do your Estate Planning properly.
Footnote: The court noted that Kari could sue her mother based on the divorce agreement, but that won’t do her any good. She told her hometown newspaper The Enterprise that her mother died in 2007 after moving to Norway and spending all the money.
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