Family couple relationships crisis difficulties

Failing to update retirement plans and insurance policies as well as other important papers often leads to problems when it comes to beneficiaries.

A fairly common situation of inadvertently giving an ex-spouse money is highlighted in the USA Today Your ex could get rich if you don’t update your beneficiaries” as it explains how unexpected consequence can occur when people do not change the beneficiaries on their retirement plans and life insurance policies after they get divorced.

For many people those beneficiary designations were made with little thought on the first day of a new job. They are just part of the paperwork new employees fill out. Typically, married people tend to designate their spouses.

If those designations are not changed after a spouse becomes an “ex-spouse,” then the accounts automatically go to the ex-spouse when the person passes away.

To make matters worse, even if the ex-spouse is friendly and wants to give the money to other family members, such as children or a new spouse, it is not that simple. Doing so would be classified as a gift and only $14,000 can be given to any individual per year without incurring a tax penalty.

Since retirement plan and life insurance policy beneficiary designations are such an important part of most people’s estate plans, it is vital that changes be made after any major change in life circumstances.

It might be helpful to meet with an estate planning attorney when life changes occur such as divorce, the birth of a child or the death of a previously named beneficiary.

Reference: USA Today (Jan. 14, 2016) “Your ex could get rich if you don’t update your beneficiaries

Mr. Amoruso concentrates his practice on Elder Law, Comprehensive Estate Planning, Asset Preservation, Estate Administration and Guardianship.