I want to share a personal story from last year that affected one of my clients, which illustrates the point of how important having current beneficiaries listed on your accounts really is. My client, let’s call him Phil, had a horrific car accident that left him weak and partially disabled. During this time, his brothers widow came to help him at his house. She helped him for about two months before he passed away as he couldn’t recover from the depth of his injuries.
I was contacted by his sister to let me know that he had passed. The sister then expressed to me how the lady helping Phil was trying to steal all his assets. In the two months she had helped him, she got him to change his will and name her as the beneficiary of all his assets. And she had hired a probate attorney to make sure she got everything as beneficiary. Unfortunately, this meant that she got his valuable California home. The sister was very upset and was worried that this lady was going to get all of Phil’s investment assets that I managed for him.
Then I told her the wonderful news that Phil and I had done a beneficiary review a few years earlier and made sure that all his accounts had current beneficiaries listed. Every single one of his accounts with me had named his sister and his niece as beneficiary to be split 50/50. Named beneficiaries override whatever is in a will or trust, so the money would be going to them. I want to re-iterate that point because it is extremely important to understand: It doesn’t matter what your trust says. It doesn’t matter what your will says. If you have named a beneficiary on your account, it will go to that beneficiary.
The probate attorney contacted me and I told him that I had already contacted the beneficiaries and that his client was not named. I felt pretty good about being able to say that. I transferred the money without a problem to the named beneficiaries and never heard from that attorney again.
I strongly suggest that everyone does a beneficiary review either on their own or with their financial advisor as soon as possible. Here is a short list of accounts that should be checked:
- company life insurance policies
- personal life insurance policies
- retirement plan through work (401(k), 403(b), 457, etc.)
- all IRA’s
- all investment accounts (you can setup a Transfer on Death agreement for most accounts)
- current will
- current trust
Another reason to do a check is if you have been divorced because people tend to forget to change beneficiaries from an ex-spouse. I hope you found this helpful and please contact me if you would like to schedule a complementary beneficiary review at my office!