Up and Coming Weekly is a weekly publication in Fayetteville, NC and Fort Bragg, NC area offering local news, views, arts, entertainment and community event and business information.
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June 24-30, 2015 UCW 11 WWW.UPANDCOMINGWEEKLY.COM It is important to keep financial information updated. For example, if you have an IRA and do not review it and update it regularly, horrible things can happen. For example, if a beneficiary form is not current, intended beneficiaries may be disinherited. There may be no stretch IRA for the beneficiaries. The five-year rule may apply to inherited IRAs. IRA trust planning may be negated. It can unwind divorce agreements. Here are a few instances of things that can go wrong if beneficiary forms are not current. In case one, Kennedy versus Plan Administrator for Dupont Savings and Investment Plan, a couple got divorced and the wife waived her interest in the 401(k). The 401(k) beneficiary form was not updated to name the daughter as intended. The husband died and the ex- wife battled her own daughter in court for eight years. The U.S. Supreme Court unanimously ruled that the wife received the retirement plan money because she was named on that beneficiary form. In case two, Cajun Industries, LLC versus Robert Kidder, United States Court Middle District of Louisiana, Leonard Kidder updated his beneficiary form, naming his three children the beneficiaries after the death of his first wife, Betty. Leonard remarried Beth Bennett Kidder and died six weeks later. Kidder's children asserted that they were entitled to the plan funds. The court ruled that the terms of Kidder's plan call for a spouse to have an immediate vested interest in the plan's assets. The court rejected the notion that a waiver of spousal rights should not be required for a spouse of less than one year. In case three, Herring versus Campbell U.S. Court of Appeals Fifth Circuit, John Hunter named his wife, Joyce, as the primary beneficiary of his retirement plan with no contingent beneficiaries. Joyce died in 2004 and John died one year later without updating his plan's beneficiary form. With no named beneficiary, his plan defaulted to one of five beneficiaries in this order: 1. Surviving spouse; 2. Surviving children; 3. Surviving parents; 4. Brothers and sisters; 5. His estate. Because Joyce was deceased, the plan's next beneficiary was the surviving children; however, the plan determined his stepsons were not his children biological or adopted. Hunter's six brothers and sisters received the entire $300,000 from the plan. The stepsons challenged the ruling but to no avail. In case four, "The Pension Pickle", New York Post, January 2005, a Brooklyn man, married to his wife for 20 years, was left destitute when her pension was awarded to his sister-in-law. The wife suddenly died of a heart attack with the husband seemingly entitled to nearly $1 million in a pension account. The wife had not updated her beneficiary form in 27 years, four years before meeting her husband on a 1978 blind date. The old beneficiary form awarded the pension assets to the wife's mother, uncle and sister. The mother and uncle had died, so the sister collected the entire pension. Case five shows what can happen when there is an incorrect beneficiary form on your IRA. Estate beneficiaries are different from beneficiaries listed on the IRA beneficiary form. The IRA owner wanted his three children to share his IRA equally. He outlined those instructions in his will, but the beneficiary form listed only one child. A fix, if possible, is very messy and expensive. In case six, an IRA beneficiary accidentally transferred funds to a non- IRA account while online. There is no rollover option for an inherited IRA. The tax on the accidental transaction was approximately $300,000. In closing, update your IRA beneficiary form, it is extremely important. Retirement Horror Stories by ALAN PORTER ASK about our SUMMER iLASIK SPECIAL & FREE Consultation Caption: It is important to keep legal documents updated. ALAN PORTER, Financial Advisor at Strategic Wealth http://www.iflretirement. com/Alan-Porter COMMENTS? Editor@ upandcomingweekly.com. 910.484.6200