Prior to meeting Diane, Jack had been married to Sue. They were young, rushed into marriage and things simply didn’t work out. They divorced and went their separate ways.
Jack marries Diane and they enjoy a blissful marriage for over 30 years. They live a comfortable life and look forward to retirement. They have big plans to live on a lake and enjoy the good life. Jack’s been working for the same employer for his entire career and has wisely set aside a large nest egg in his IRA.
Sadly, Jack dies unexpectedly. Diane feels comfortable in the knowledge that their nest egg will be enough to take care of her in her golden years. Later when Diane goes to the bank to have the IRA account put into her name, she discovers that Sue inherited the entire account! Diane presents a copy of Jack’s Will showing that she should inherit everything. The bank explains to Diane that an IRA does not fall under the guidance of the Will. The beneficiary listed on the account inherits the funds. Jack simply failed to update his beneficiary form. Sue is now enjoying the good life.
Don’t let this happen to you:
- Confirm that you have the correct beneficiaries on all IRAs
- For 401K’s – the spouse at the time of death is the automatic beneficiary unless they sign a release. If you want someone other than your spouse to inherit your 401K this release needs to signed.
- For 401K’s where you’ve never been married, be sure to update your beneficiaries
- For all accounts be sure to list a contingent beneficiary as well
- Have a current Will drawn up. Discuss with your CPA and attorney changes in estate planning goals.
No one wants to leave their loved ones with a legal mess when they die. Small steps taken of now can ensure that your loved ones will be provided for as you intended.