By Jehan Crump-Gibson, Contributing Columnist
Some of the biggest mistakes people make concern beneficiary designations. Either someone forgets to name a beneficiary on an account or forgets to update a beneficiary on an account. These mistakes result in a one-way ticket to probate court or in some cases, your money passing on against your wishes.
A beneficiary is a person or entity that receives a benefit from something. Common examples of that “something” include trusts, wills, life insurance policies, retirement accounts and bank accounts.
A lot of people, regardless of whether they have a will or trust, name beneficiaries on life insurance policies and retirement accounts. They may bear this in mind when they set up the account, or the institution may prompt them. Once this is done though, most people do not think about it again. In some instances, years down the line when they pass away, either their named beneficiary has already passed away, the relationship with that named beneficiary has soured or there are other life circumstances that suggest the named beneficiary should not receive the money.
Let’s take Serena, who was married to her first husband Bill for 5 years until they divorced. Among other things, Serena had a life insurance policy and Bill was named as beneficiary. Serena meets Jim a few years after the divorce.
Crazy in love, she completely forgets about the life insurance policy. Serena and Jim are married for 31 years until her untimely passing. They have two children, who are now young adults. Their daughter is in graduate school, studying journalism and their son is a police officer. He is expecting his first child.
As Jim begins to pick up the pieces after Serena’s death, he comes across an old file in the basement that has insurance paperwork. “Wow”, he thought. “I wasn’t expecting this. I can give something to the kids to help them out!” He calls the insurance company, gives them the policy information and tells them he is the policy owner’s spouse. Before they tell him what to do next, they ask him to verify his name.
Much to Jim’s dismay, they advise him that they cannot tell him who the beneficiary is, but it is not him. Then it hits him— Bill is still named on the policy. Shocked, Jim calls everyone he knows from his bike club. His buddies connected him with an independent insurance agent and an attorney. He is told that there is nothing legally he can do about it. He is devastated. Certainly, Bill isn’t turning over the insurance proceeds.
Herein lies the danger in not keeping up with these things when life events happen. There’s no way Serena would have wanted Bill to have the money. They had not spoken since shortly after their divorce. Had Serena checked her accounts and policies, she would have been able to catch this oversight, and her money would have gone to her beloved family. Don’t let this happen to your family, as there will likely be no way to fight it. Not even a Will or Trust can override a beneficiary designation! Whether you have an estate plan or not, double check the beneficiaries on your life insurance policies, retirement accounts, annuities, bank accounts, stock, the whole 9! Periodically, make a list of these accounts and beneficiaries— and check it twice!
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Attorney Jehan Crump-Gibson is the Co-Founder and Managing Partner at Great Lakes Legal Group PLLC, where she concentrates her practice in probate and estate planning, business and real estate matters. Great Lakes Legal Group is a growing black-owned law firm serving clients throughout the state of Michigan and in federal courts across the country. Jehan has served as Faculty for the National Business Institute and the Institute of Continuing Legal Education concerning business, probate and estate planning matters. She is a legal analyst with Fox2 Detroit’s The Noon and the author of the book A Matter of Life and Death.
