Friday, July 11, 2014


This story stinks - Man's Mistake Costs His Children $400,000 IRA Inheritance

At first I assumed it was another situation where a family is simply disagreeing over the disbursement of funds, but this one sounds more like a legitimate mistake. The man in question made a will specifying that his children receive his retirement funds. And he wrote on the beneficiary form for his IRA that he wanted the funds to be distributed according to his will.

Unfortunately, that wasn't a valid way for him to fill out the beneficiary form, which means that it made his surviving spouse the beneficiary by default. And there doesn't seem to be any way around this - IRA beneficiary forms are valuable because they bypass the probate process and allow beneficiaries to receive the money without waiting for the estate to go through probate. But that also means that they are not beholden to the will - the form outranks it and a mistake can mean that a default beneficiary will receive the money. This could also mean, for example, if you forget to update your form after getting a divorce - your ex-spouse would receive the money instead of your current one, regardless of what your will says. Eek!

As the article points out, there are no automatic reminders for beneficiary forms (and clearly no one at the institution that manages the IRA is looking at them to make sure they are valid). Peanut and I last updated our forms shortly after Baby M was born, and haven't really taken a look at it since then. I think I will put a reminder in the calendar to review these forms once a year.

When was the last time you checked your beneficiary forms? 

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