We recently discussed retirement account beneficiary forms in our weekly video. We recommend watching it (https://mullooly.net/retirement-account-beneficiary-forms-very-important/7603). In this week’s Mullooly Asset Management podcast, Tom and Brendan share two examples that illustrate the importance of filling out and updating these forms.
When it comes down to it, filling out and updating your retirement account’s beneficiary form is paperwork. Nobody likes paperwork. It’s boring to do and talk about, but do you want your retirement savings to end up with the wrong person following your death? Probably not. So while they’re not thrilling, these forms hold a great level of importance. They shouldn’t be forgotten about, as they often are. One thing to remember about retirement account beneficiary forms is that they supersede what’s in your will. Many individuals aren’t aware of the magnitude this form has.
A famous example of somebody who was unaware of the beneficiary form’s importance comes from the Supreme Court case, Kennedy vs. DuPont. The Supreme Court ruled that a woman was not entitled to the proceeds from her father’s $400,000 company retirement plan. Instead, her father’s ex-spouse received the money; even though she had waived her rights to it in the divorce decree. The beneficiary form superceded the divorce decree.
Another similar example involved a man named Bruce Friedman. Bruce’s wife Anne passed away. She had accumulated almost a million dollars in her teacher’s retirement plan, but Bruce never got any of that money. Bruce assumed that since they were married, he would receive the account’s balance should anything happen to Anne. Unfortunately for Bruce, Anne filled out the beneficiary form four years before they were married and never updated it. The money ended up going to Anne’s sister instead because she was listed on the form.
You can read more about both cases here: https://www.deltacommunitycu.com/forms/beneficiaryinformation.aspx
Three things that individuals with retirement accounts need to remember are:
1.) Do not assume you are the beneficiary!
2.) Do not assume you filled out a beneficiary form for your account!
3.) When you move or have a change in your life, UPDATE the form!
The beneficiary form will supercede what’s in your will! Don’t forget that.
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