Anytime I execute new estate planning documents with clients I remind them to check the documents every year at the start of the New Year to be sure that they still meet their needs. There are additions to families, subtractions, job changes and life changes that often necessitate new beneficiaries, executors and trustees.
I give this advice as it is prudent to keep such documents up to date, but, more so, to help clients avoid unintended consequences. In my business, I unfortunately see many worst-case scenarios that could have been easily avoided with a modicum of planning.
Recently, I was reminded of such a situation and I use it here as an example of the importance of reviewing all of your important papers regularly. I represented an estate of a divorced lady who died unexpectedly. She did not have a Will and her life insurance and pension beneficiaries had not been updated in more than 10 years. This was a problem as the woman was divorced about 8 years ago. Can you see where this is headed?
“Betty” had failed to change the beneficiary designations on her life insurance policies as well as her IRA accounts after the divorce. Mr. ex-husband remained the sole benefactor on the life insurance and pension benefits. Even though Mr. ex-husband had little but dislike for Betty since the divorce, this did not prevent him from seeking all of the benefits even though it was to the detriment of those Betty would have likely chosen: their three adult children. While the three children could have contested the matter, given the present status of PA law, they would have likely been only partially successful in challenging their father’s right to the monies. In the end, they made a deal with “dear old Dad” and he kept money to which he most certainly would not have been entitled.
I share this story not to point a finger at Betty. No one knows why she did not take the appropriate action to update her documents or make a Will. A divorce is a traumatic event from which it can take years to recover. Also, as I see almost daily, most folks do not want to think about their own mortality so they don’t. Had she planned accordingly and kept everything updated, however, all of her assets would have passed to her intended beneficiaries.
What is the take-away from this situation?
1. Take the time to plan for your estate. No, it is not pleasant but with a small amount of your time, you can assure that your estate passes to those of your choosing. In Pennsylvania, a solid estate plan for most folks is a Will and Financial and Healthcare Power of Attorneys.
2. Review your estate planning documents as well as any life insurance policies, IRA’s 401K, Roth plans, etc… at least yearly. The short time it takes to make a needed change can save your loved ones much angst and money.
3. Sadly, when there is money at stake, don’t assume that everyone will do the right thing.