We have warned our readers more than once about the dangers of failing to keep their estate plans up to date in this blog. It is important to create an estate plan so that your assets will be distributed the way you wish after you die. It is also necessary to double check the plan periodically to make sure that it still reflects your wishes.
After all, things change in life. People come in and out of our lives. Marriages end and children are born. People who fail to update their beneficiaries in their wills and trusts could wind up leaving their estate in a way they no longer wish to.
Some examples may help drive home the point. In one case that reached the U.S. Supreme Court, a man was killed in a car accident two months after getting divorced. He had named his ex-wife as beneficiary for his life insurance policy and his pension benefits while they were married, and did not amend that before the accident.
His children argued that state law cancelled out the plan, but the Supreme Court ruled against them. So the benefits went to the ex-wife, which is likely not what the decedent would have wanted.
In another case, a man mistakenly believed that he did not have to change his estate plan to make his daughter his beneficiary in place of his ex-wife. When he died seven years later, the ex-wife inherited $400,000, against the decedent’s intent. The Supreme Court again sided with the ex-wife, finding that the divorce agreement did not overcome the out-of-date estate plan.
These unfortunate cases will hopefully prod some readers to take another look at their estate plans.
Source: Market Watch, “Don’t make this common estate-planning error,” Bill Bischoff, Sept. 17, 2013
