I’ve previously written about the importance of reviewing your estate plan, specifically your beneficiary designations, in the event you decide to get a divorce. A 2009 U.S. Supreme Court Case, Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, highlights why reviewing your estate plan after a divorce is so important.
Before I discuss what happened in the Kennedy case, I want to impress upon you two of the main benefits of preparing your estate plan. The first benefit is that it will get you organized financially, and the second is that you will not lose track of any of your financial accounts, making sure that your estate plan is properly funded.
Preparing Your Estate Plan will Get you Organized Financially
The first main benefit to preparing your estate plan is that it forces you to get organized financially. What I mean by that is that every client that comes through my office is forced to list out each and every single financial account they have.
And once you finish this exercise, you will be more organized financially than you have ever been before. Here is why this is so important…
In North Carolina, there is currently over $400 million being held in the Department of Unclaimed Property. This is money in bank accounts, wages, insurance proceeds, stocks, bonds, safe deposit boxes, etc., that have been abandoned by the owner of the property.
This can happen when somebody moves and fails to update their address, or when they die and the heirs don’t know about the asset.
These unclaimed funds are then turned over to the North Carolina Department of State Treasurer for safekeeping, not your heirs.
So that is the first main benefit of preparing an estate plan in North Carolina – to keep your assets in the hands of the people who you intend to receive your money, and out of the Department of Unclaimed Property.
By Preparing an Estate Plan, You will Not Lose Track of any Financial Assets (or beneficiary designations)
After you have gone through the exercise of listing out all of your financial accounts, you will have in your hands an inventory of everything you own, how it is titled, and who the designated beneficiaries are.
As a Cary Estate Planning Lawyer, I help my clients to prepare this spreadsheet, and we update it at regular intervals. This is important so that you never lose track of your financial assets, or who is the intended beneficiary of a certain life insurance policy or retirement account.
Why is this so important?
Let’s get back to the Kennedy case I referenced at the beginning of this blog post.
The Story of William and Liv Kennedy
William and Liv Kennedy were happily married in 1971. As is the case with many married couples, William named his wife as the beneficiary under his DuPont Pension Plan.
Unfortunately, William and Liv eventually decided that their marriage was not all they had hoped it would be and they agreed to a divorce in 1994. In the divorce decree, Liv agreed to divest herself of any right she had to claim the benefits from William’s pension plan. However, William never signed any legal documents that named a new beneficiary for his pension plan after the divorce.
In 2001, William passed away. His daughter was appointed executrix of his estate and asked DuPont to distribute the remaining pension funds (approximately $400,000) to the estate. Instead, DuPont paid the funds to William’s ex-wife Liv, because she was the only beneficiary named on the beneficiary designation form that William prepared in 1974, and which had never been updated after the divorce.
And ultimately, after years of litigation and untold thousands in legal bills, the US Supreme Court sided with the ex-wife and allowed the distribution of the pension funds to stand.
What’s the lesson here?
The big lesson here is two-fold. First, it is important to have a full understanding of where all your assets are and which beneficiaries are listed for each of your accounts.
Second, if you are going through a divorce, NOW is the time to revisit your accounts and make sure that your beneficiary designations are properly updated to reflect your intentions.
Have questions? Need some help? As a Cary Estate Planning Attorney, we can help you to make sure your plan accurately reflects what you want to happen to your assets in the event of your passing. Feel free to contact us using this form or call our office directly at (919) 460-5422.