What might happen if I fail to update my beneficiary designations on my life insurance policies, bank accounts, and more?
While most of us put off estate planning, failing to take some basic steps towards preparing for your eventual death could come at a significant cost for your loved ones and your legacy. One of the most important things you can do is take the time to designate a beneficiary on your insurance policies, bank accounts, and retirement accounts, or update your beneficiary as your life evolves. To highlight the importance of updating your beneficiary designation, consider the following real-life horror stories of people who put off estate planning until it was too late.
Stepsons Left Out of Inheritance
A 2012 Fifth Circuit Court of Appeals case resulted in a devastating financial loss for the beloved stepsons of an individual who failed to update his beneficiary designation. In the case of Herring v. Campbell, John Wayne Hunter died before he could update the beneficiary of his pension. Hunter’s wife had died some years prior and Hunter did not have a secondary beneficiary in place. The plan administrator determined that Hunter’s two stepsons did not qualify as children and thus could not receive the pension. Instead, pension benefits reverted to his siblings. The court upheld the administrator’s decision, despite evidence Hunter considered his step-sons as his own.
Ex’s Receiving Your Inheritance
About half of all Americans will go through a divorce at some point in their lifetime. How would you feel if your ex-spouse received your life insurance or pension benefits? Unfortunately, for some people, this nightmare has become a reality when they failed to update their beneficiary designations. Several cases have upheld beneficiary designations to ex-spouses, ruling that these designations trump state law that would otherwise invalidate inheritance to an ex.
Step-children and divorces are just two scenarios of many in which the failure to update your beneficiary designation forms can cause significant problems for your heirs. Take the time now to review your beneficiary designations and update them as needed. With some proactive planning, you can ensure your loved ones are protected and cared for after your death.