Life After Divorce: Beneficiary Designations
Have You Changed all Your Beneficiary Designations?
In January 2009; the U.S. Supreme Court ruled (Kennedy v. DuPont Plan Administrator) against a woman suing her late father’s pension plan for money her mother received, even thought the mother had forfeited her rights to the pension in their 1994 divorce. The Supreme Court determined the beneficiary designation form and the procedures set under the plan were sole determinants of benefit distribution.
Employers are required to pay benefits as stated in the original beneficiary designation form, in spite of a divorce decree.
It is important for all divorcing individuals to revisit their estate planning, including beneficiary designations, wills and trusts. Changes must be made to retirement plans in accordance with the rules set forth by respective employers. Otherwise, children and/or new spouses may not be eligible to receive benefits.
Remember the following points:
1. Wills have no precedence/jurisdiction over the beneficiary designations of IRAs, 401(k)s, insurance policies and annuities.
2. It is always important to designate a contingent beneficiary for these accounts. Otherwise, if a primary beneficiary predeceases the owner, the account will need to be probated.
3. Naming a minor as a beneficiary sends estates straight to probate. Probate courts must supervise distributions left to minors. Establishing trusts in the children’s name will bypass probate.
4. Changing beneficiaries can often be done online or with the assistance of a financial advisor.
If you do not have a financial advisor with expertise in divorce, please consider obtaining one. Divorce is likely to be the most difficult financial transition you will ever experience. Professional guidance and support during and after this emotionally charged time will prove invaluable.
Justin A. Reckers CFP®, CDFA™, AIF®
858.509.2329
jreckers@pacdivorce.com
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Our firm does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences. The information provided herein is obtained from sources believed to be reliable; but no representation or warranty is made as to its accuracy or completeness.
Tags: Beneficiary Designations after divorce, Divorce Financial Planning, Financial Life After Divorce, Justin Reckers, Pacific Divorce Management, Post divorce financial planning, post divorce wealth management, Retirement Planning and divorce
This entry was posted on Wednesday, July 15th, 2009 at 12:20 pm and is filed under Beneficiary Designations, California Divorce Dictionary, Divorce Financial Planning, Post divorce financial planning, Retirement Planning. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
