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Halloween is Trick or Treat time.

Such a simple phrase on a rather interesting evening of dressing up and asking complete strangers to give you a treat.

What happens when someone you have loved, cherished and been married to gives you the trick of a lifetime?

This occurrence has become known as …

 “The Pension Pickle” – New York Post

Bruce Friedman of Brooklyn, New York was married to Anne Friedman for nearly 20 years, when Anne died suddenly of a heart attack in September 2001.

Friedman said, “he never doubted he’d be entitled to the lump-sum payment of $900,862 because the Teachers’ Retirement System sent out annual statements that indicated his wife had named no beneficiary.” That would make him, as her closest relative, the beneficiary.

But after she died, officials found a form which had been filled out 27 years before her death, four years before the couple met on a 1978 blind date.It indicated Anne’s mother, uncle and sister should collect.

Anne’s mother and uncle died, so the money was awarded to the sister, Virginia McLaughlin – and Friedman complains that she won’t give him a cent.

Friedman has sued and lost.  All the nearly $1,000,000 is Virginia’s to keep.

The Beneficiary Form

Before you dash off your spouse’s name or put Junior’s Social Security number on the dotted line, make sure you’re not making any of these mistakes:

Assuming your will is going to take care of all the details.
Beneficiary designations always trump what’s in a will. These documents must be consistent with one another: If you set up a trust, designate the trust as the beneficiary, not the person you named in the trust to inherit the money.

Subjecting your heirs to an avoidable tax bill.
Failing to name beneficiaries on your IRA (or consigning it to your estate) robs your heirs of the ability to maintain tax-advantaged growth over their lifetime (via a stretch IRA strategy). Without a beneficiary, your IRA money will go through probate, and your family (excluding spouses) will be required to withdraw the money within five years.

Forgetting to update forms when life happens.
Just as bad as failing to name a beneficiary is not updating designations when beneficiaries marry, divorce, come of age, or tick you off. That’s how exes and bitter sisters-in-law strike it rich.

Not having a plan B.
If your primary beneficiary isn’t around to collect, and no secondary beneficiary is named, the court decides who gets the dough. Be exact. You can name multiple primary and secondary beneficiaries, so don’t be afraid to spell out how you want your assets divided.

Naming minor children as beneficiaries.
Until age 18 or 21 (depending on state laws), minors can only inherit limited amounts. Designate a financial guardian or set up a trust for the kiddos. Either should have detailed directions on how to manage the windfall until the children are of age.

Triggering probate on life insurance proceeds: Similarly, naming your estate — not an individual or a trust — as the beneficiary of your life insurance subjects it to probate.

Disinheriting kids from a first marriage: Houses, bank accounts, and other assets held jointly go right to the co-owner, no matter what your will states, leaving children from a previous marriage no rights to contest. You can prevent them from being cut out with beneficiary designations on other assets that carry no spousal or joint ownership constraints.

Failing to get permission to bequeath your qualified retirement plans: By law, spouses are first in line to inherit retirement funds and assets subject to the right of survivorship laws. If you wish to leave the money to someone else, your betrothed must sign a written waiver, or else the deal is off at death.

Assuming your wishes are on file: Don’t take it on faith that a beneficiary form you filed 30 years ago is still in some bank’s file — or that when you switch plans your form follows suit. Get copies from every bank, fund, and insurance company.

Updating forms incorrectly: Marking up beneficiary forms and initialing your changes won’t hold up in court. To override old designations, make changes in writing, and give a copy to the institution where the original is (hopefully) on file.

Keeping your plans a secret: While alive, Anne Friedman insisted that she had updated her million-dollar pension beneficiary form. But no one could locate it after her death. Make copies and tell your executor and loved ones where they’re kept.

Investors should consult with their own Tax Advisor or attorney with regard to their personal tax situation or will.Investors should consult with their own Tax Advisor or attorney with regard to their personal tax situation or will.

Not sure where to start or how to get this accomplished?

Give us a call and we can work together to make sure that when you are possibly performing alongside Michael Jackson in his Thriller Video in the after world that your beneficiaries and loved ones are not facing these issues.

While it doesn’t feel like Fall, enjoy your last weekend of October

Click here to schedule an appointment? 

Michael Tannery CPA CDFA® AIF® ●  CEO
Registered Principal

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