The news is filled with celebrity passings this last week. Ed McMahon lived a long and good life. The other three Michael Jackson, Farrah Fawcett and Billy Mays had not reached conventional “old age”.  This demonstrates the importance of estate planning before a health crisis hits or something sudden happens. By estate planning I mean a short list of items:

  • Do you have a valid, updated will and/or trust for your estate that expresses your wishes? (Moving states, divorce, inheritance are reasons to update.)
  • Do you have sufficient life insurance for your family to continue your current lifestyle? (new baby or life change may call for more insurance)
  • Have you protected your estate financially with Long Term Care Insurance?

Without estate planning you are setting your family up for:

  • Leaving your family without the financial resources necessary to carry on without you.
  • Longer time to settle your estate.
  • More expense in settling estate and less money for your family.
  • Family conflict if your wishes were not in a will or trust. This destroys the family left behind.

Move estate planning to the top of your to-do list so you can live without regret. Also check-in with your parents and siblings to make sure they have taken care of the three questions above. Families are complex and if another member of your family hasn’t taken care of their affairs you may end up dealing with the aftermath.

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In January of this year the Supreme Court put forth a ruling that sets up legal precedence for having your beneficiary paperwork accurate. In Kennedy v. Plan Administrator for the DuPont Savings & Investment Plan the Supreme Court ruled that a savings investment plan administrator accurately paid the ex-wife of a client, because the proper ERISA paperwork was not filled out when he was divorced. This ruling happened even though the ex-wife gave up all rights to retirement accounts in the divorce decree.

This resulted in his daughter and estate not receiving the $402,000 that was in this account. One mistake cost his estate $402,000.

 Read the case , but here is a summary:

  • William Kennedy divorced Liv Kennedy in 1994.
  • Divorce decree stated that Liv Kennedy waived rights to any of William’s retirement accounts and pension.
  • William Kennedy changed the beneficiary paperwork for his pension so that his ex-wife was not the beneficiary, but did not change it  for the DuPont savings and investment plan (SIP) in which he participated.
  • The SIP beneficiary stayed as Liv Kennedy with no contingent beneficiary named.
  • William Kennedy died. His daughter Kari Kennedy, the executor of his estate, contacted the SIP. Per the paperwork they paid it to Liv Kennedy because he had not remarried and no contingent beneficiary was named, leaving Liv (ex-wife) as the only beneficiary.
  • The William Kennedy estate (Kari Kennedy) sued and the case reached the Supreme Court.
  • Supreme Court ruled that the ERISA paperwork is what will determine the beneficiary. The $402,000 is not awarded to Kari Kennedy and the estate.

 One costly mistake considering the actual estate paperwork and divorce decree were evidence of William’s other wishes. Anyone want to do a beneficiary summary for their accounts and make sure things align with your estate wishes? (Or your parents accounts?)

 

Advisory Services offered through Axiom Advisors, LLC. A registered Investment Advisor Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer member FINRA/SIPC Axiom Advisors, LLC and Cambridge Investment Research, Inc. are not affiliated.