4th Apr 2014
In the last post, we considered the following hypothetical example to illustrate some major points about beneficiary designations:
Consider the following example. A father dies, leaving three adult children. His wife predeceased him. His will reads that his estate will be split equally between his three children under those circumstances. However, as the family goes through all the documentation left behind, his retirement account from his work, which is a substantial part of what he owned at death, was payable to his wife, and since she predeceased, then to the oldest son alone by name under beneficiary designations on the account.
The legal result will be that dad’s work will pay out the entire retirement account to the named beneficiaries – which in this case was the oldest child alone. The assets subject to the last will and testament will pass to the three children in equal shares.
Is this a good result or a bad result or something in the middle? This mainly depends, at least from the father’s perspective, on intent.
The father may have intended to leave more to his oldest child for a good reason. You can fill in the blank with whatever you consider a good reason. Perhaps it was a reward for staying and working in the family business for years – which may have increased the overall estate for the other children. Perhaps the older child gave investment advice to the father through the years regarding the account, and the gift was a reimbursement and token of thanks for the help through the years. Perhaps the father knew the older child would share with the younger children or that the younger children would blow the money on drugs. Whatever the reason, the main issue is whether the father had an intentional reason.
On the other hand, if the father set up the retirement account to pass to the oldest child only because the oldest child was the only child on the father’s first day of work when he set up the account, and father never changed the account through the years, it is probably a bad result.
A major takeaway from this post is that it is necessary to coordinate beneficiary designations with estate planning documents such as wills and trusts.
This blog contains general information and the opinions of the author – not legal advice; you should seek the advice of competent counsel (attorney/lawyer) when considering any legal issues.