How a Forgotten Form Led to His Ex Getting His $1 Million Retirement Account
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This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. Listen at schwab.com slash Washington Wise.
Here's your money briefing for Tuesday, June 11th. I'm J.R. Whelan for The Wall Street Journal. You know that person you listed on your retirement account or life insurance policy to receive the money in case you die? Make sure they're still your top choice. In some cases, the beneficiary forms prevail over a will, even if they were filled out decades ago.
This is kind of one of these horror story cases. The man who died in 2015, he was just 59, single, no children. In 1987, he had listed his then live-in partner on his beneficiary form, but they split up in 1989. And now they've been fighting in court because his two brothers say that there's just no way that he would have intended for this long-ago ex to get the money.
We'll talk to Wall Street Journal personal finance reporter Ashley Ebling after the break.
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What happened in the $1 million retirement beneficiary legal battle?
Paid for by the Electronic Payments Coalition.
Not keeping up with who you've listed as beneficiaries on your retirement and financial accounts can result in a legal mess when you die. Wall Street Journal reporter Ashleya Ebling joins me. Ashleya, when someone is listed as a beneficiary, what does that entitle them to in the event of the account holder's death?
In most cases, that just basically means that the beneficiary gets the account when that person dies. So they get all the assets in the account. If you have a million dollar retirement account, that beneficiary gets to cash it out.
What types of accounts are people typically asked to name a recipient?
Well, retirement accounts for sure, life insurance as well. And that's whether it's a life insurance that you set up through your workplace or separately on your own. Also, bank and brokerage accounts, it's getting to be more and more common that people are listing beneficiaries.
Are there any special rules that apply to workplace retirement accounts?
Workplace retirement plans have special protections for surviving spouses. If you're married and you've named someone else, that surviving spouse can come in and they would be the rightful owner of the account.
Is an account holder required to name someone as a beneficiary?
There's no requirement. And that's also part of the problem. So some people don't take this seriously or they just named someone when they opened up an account years in the past. And then that's not their intent years later.
Does the person or people on that list of beneficiaries have to give consent? And how much information does an account holder have to provide about them?
You brought up another problem. So people often name a beneficiary but not tell them. And then it can be years later and the employer plan has to do the due diligence and try to figure out who they need to pay out this money to when the account holder dies and they might have trouble finding the beneficiary. It's important to talk to your beneficiary, even give them a copy of the beneficiary form. I talked to a lawyer for this story and there were two beneficiaries named and they found the one right off, but the other one, it's eight years later and they haven't found the other person. So they're now fighting over who should get that other 50% of the money. So best practices when you name a beneficiary, you should include at a minimum the name and address and a cell phone.
And most plans actually ask for a social security number as well, because that makes it easier for the plan to eventually track down that person.
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