Outdated Beneficiaries Could Cost Your Spouse Everything

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Most people assume they know where their assets will go when they pass away—especially when they’ve created a Will or Trust. But what about your retirement accounts?

You may not realize that your IRA, 401(k), pension, or life insurance may not follow your Will or Trust at all. Instead, these accounts typically pass according to the beneficiary designation on file—a form you may have filled out decades ago and never looked at again.

A Cautionary Tale: When Assumptions Cost $900,000

Anne Friedman was a longtime educator in the New York City school system. Early in her career, she named her mother, uncle, and sister as beneficiaries of her retirement plan. Years later, Anne married Bruce, continued her successful career, and eventually retired as a principal. She and Bruce were happily married for nearly 20 years.

beneficiary

After Anne’s death, Bruce assumed he would inherit her $900,000 retirement account—especially since her account statements showed no current beneficiary listed. But the retirement system located an old beneficiary form from 27 years earlier. Anne had never updated it.

By then, Anne’s mother and uncle had passed away. Her sister, the only surviving name on the form, became the sole beneficiary. Despite Bruce’s legal challenges, the courts upheld the outdated designation. Bruce received nothing.

Why This Happens—and How to Avoid It

Retirement accounts, life insurance, annuities, and even some bank accounts and real estate in certain states pass outside of your Will or Trust. The beneficiary form overrides everything else.

That means even the most carefully crafted estate plan can be undone by an outdated form.

What You Can Do Now

  • Locate and review all your beneficiary designations—IRAs, 401(k)s, life insurance, annuities, and more.
  • Update them if your life circumstances have changed (marriage, divorce, children, deaths).
  • Coordinate your beneficiary designations with your overall estate plan so they work together, not against each other.
  • Consult with an estate planning attorney to make sure your assets go exactly where you want them to.

Don’t let an old piece of paper decide your legacy. Taking a few minutes to review your designations could make all the difference for your loved ones.

From the desk of Attorney Brandon McGee

Brandon McGee
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