Home Estate Planning Make Sure Your IRA Beneficiary Is Correct

Make Sure Your IRA Beneficiary Is Correct

by My Journey to Millions

A few years ago the United States Supreme Court ruled in Kennedy v. Plan Administrator for DuPont Savings and Investment that 401(k) proceeds would go to the decedent’s ex-wife (divorce occurred in the 70’s) instead of the new wife (marriage was in tact for more than a decade) because that is what the account beneficiary indicated.  While the decision was narrowly decided for ERISA plans (i.e. 401(k)) it should have been a wake up call to everyone to verify your account beneficiary.

Well not everyone listened!

Assets Will Go To IRA Beneficiary Regardless of Intent

Author/Publisher Bill Singer provides some background about the case (In the Matter of the FINRA Arbitration Between Succession of Newman Trowbridge, Jr. through its Executrix, Lee Trowbridge, Claimant, vs. Capital One Investment Services, LLC, and Rick E. Schenck, Sr., Respondents; FINRA Arbitration 10-02435, May 9, 2011) in “The Lawyer, The Stockbroker, the Ex-Wife, and the Widow:”

In 2009, Trowbridge unexpectedly died, and his widow (also the estate executrix) obtained a court order requiring that all account holders pay funds over to the estate. Notwithstanding the order, Capital One paid the IRA balance to Trowbridge’s ex-wife, whose name had never been removed as the named beneficiary.

Afterwards, the Widow-Executrix filed an arbitration claim with FINRA for the balance of the IRA and bunch of ancillary costs (interest, attorney’s fees, etc).  The arbitration panel found that the Court order requiring the account holders pay funds over to the estate did not err in providing the IRA in question to the ex-wife as it passes outside of the estate due to its beneficiary provision.

Mr. Singer sums it perfectly,

Trowbridge [The Decedent] was a skilled lawyer who managed his professional and personal financial affairs. Regrettably, he may well have simply forgotten to change his IRA beneficiary. To err is human, but to place the blame for such a mistake upon the defendants is not the arbitrators’ proper role.

When is the last time you checked your beneficiary provisions?

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krantcents 08/22/2011 - 11:24 am

My mutual fund sends me a notice annually. I think it is a good idea to review these kinds of decisions at least once a year.

Hunter 08/22/2011 - 2:22 pm

What a distster, to have your retirement account assets automatically sent to a beneficiary that no longer has any relevance in your life. Totally agree with KC, review these important details at least annually, and whenever there is a life change.

Ginger 08/22/2011 - 4:11 pm

I am going to have to check that immediately, thanks for the reminder.

retirebyforty 08/22/2011 - 4:40 pm

I don’t have an ex wife, but I see the point.

SB 08/23/2011 - 11:55 am

I would suggest reviewing this after each life changing events, marriage, divorce, separation, birth and death.


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