LPR does not write about the law, as we are not a law firm. But the story of a man who reportedly intended for his retirement to be distributed to his four children after his death — which because of a mistake on his beneficiary form didn’t happen — is something we feel compelled to bring to legal consumers’ attention.
Leonard Smith enlisted the help of financial advisors and attorneys to ensure that his children received his retirement savings upon his death. After his death, the children discovered that his IRA beneficiary form had been filled out incorrectly. Rather than listing the children by name and designating percentages to each, the beneficiary form read: “To be distributed pursuant to my last will and testament.” The children brought a lawsuit contesting the designation. The result was that Mr. Smith’s spouse of two months received the retirement funds.
In an article titled “Man’s mistake cost his children $400,000 of an IRA inheritance,” certified estate planner Jean-Ann Dorrell offers the following tips:
1) Set aside time at least once a year to update your beneficiary forms. Your beneficiary forms will override your will 99% of the time so it’s important to keep these forms up-to-date and make sure your will and your designated beneficiaries on accounts don’t contradict each other. You should fill out a new form if you’ve had a birth, death, marriage, or divorce in your family. If you can’t find your beneficiary designation form, ask the financial institution for a new one. If you choose to fill out this form online, make sure to print a hard copy for your files.
2) When filling out a beneficiary form, don’t forget to designate percentages next to the names of your beneficiaries. You can also write “in equal shares” if you want the assets to be distributed equally. Also know that writing “per stirpes” which is Latin for “bloodline,” will make sure that only someone in your bloodline will get your assets.
3) If the institution where your money is held changes its name or merges with another bank, fill out a new form. Forms with old institution names may not be valid and the banks won’t go out of their way to tell you.
4) Keep hard copies of your beneficiary forms, including your “payable on death” forms and your “transfer on death” forms in your emergency file. If all of these forms are in your account online, keep hard copies on hand because computer systems change and the forms might be hard to track down, especially if the bank has merged or changed names.
These are great tips indeed, but the highlighted part of Ms. Dorrell’s next tip is near to LPR’s heart:
5) Consider hiring a certified estate planner who is licensed in your state. Many financial planners and attorneys who do not specialize in estate planning can make mistakes when filling out forms because of state-specific rules and laws, or just plain lack of experience.
The moral? Be informed so you can protect yourself and your loved ones. Ask lots of questions and think critically about how present decisions can affect future events.
You’ve got options. The Center for Legal Practice Reform can help you navigate the attorney/client relationship and level the playing field. Call LPR today for a free consultation – (301) 351-7970.