Warning: Check Your Beneficiary Designations

Here is something that many people do not think about; including poorly trained financial advisors. With federal tax exemption at $5 million, many are not be thinking about their estate planning at the moment. Big mistake!

How many of you have looked at your beneficiary designations in the last 3 years for your:

* bank accounts,
* brokerage firm accounts,
* retirement accounts,
* company benefit plans,
* life insurance policies,
* annuities and
* 529 college accounts.

I am almost certain that most of the people reading this will have to honestly say they have not. If you haven't submitted your designate beneficiaries forms, do it NOW!. If your forms are outdated, update them NOW!. This is something serious and should be something that is discussed with your financial planner as part of your annual financial checkup. However it is commonly overlooked.

It is sad to see families losing to their entitled benefits due to forms with outdated addresses, beneficiaries, etc and creating unnecessary headaches for the families. It is sad to see the horror stories of many of these families. Just imagine your ex-spouse being the one receiving your company pension funds proceeds. Here is a warning to you; The U.S. Supreme Court ruled that the beneficiary designations trumped state law that would have automatically disinherited the ex. So she got the money, and the kids got the bills for an unsuccessful legal fight.

In another case, The US Supreme Court ruled in favor of an ex-spouse collecting $400,000 from a savings and investment plan from her former husband. What makes this case interesting is that as part of the divorce decree (signed seven years prior to his death) stipulated that the ex-wife "waived any interest in the plan". The man failed to update the beneficiary forms to make the necessary updates and transfer the beneficiary rights to his daughter which was his wish. The plan document stipulated that beneficiaries could only be changed by submitting the form. Once again the U.S. Supreme Court ruled that the outdated beneficiary designation trumped the divorce agreement.

Conclusion, do not depend on your will to override outdated beneficiary designations. If you want your life insurance proceeds to go to your church after your death, you must update your beneficiary designation forms. As a general rule, whoever is named on the most recent beneficiary form (which may not be nearly recent enough) will get the money automatically if you die -- regardless of what your will might say.