Sometimes the slightest error or a moment of forgetfulness can come back to haunt you years later, and the field of estate planning is no exception. Sometimes something as simple as changing a beneficiary’s name on an insurance policy can have drastic implications for you and your loved ones.
The Supreme Court recently heard oral arguments in one such case. A federal employee named his wife as his beneficiary on his life insurance policy. They got divorced and he remarried two years later but neglected to update his policy. When he died his ex-wife, not his grieving widow, collected the benefits that valued nearly $125,000.
At issue is a discrepancy between state and federal law. In the employee’s state, divorced spouses are automatically revoked as life insurance beneficiaries. However, the man was a federal employee and federal law preempts state law.
This case illustrates how issues of family law can affect estate planning and wealth distribution. It also highlights the importance of having a clear, up-to-date estate plan to guide your loved ones and the courts after your death. Being clear about what assets should go where both alleviates the stress put on your loved ones and protects your money from getting tied up in probate or litigation.
If you know where you would like your assets to go after you’re gone, estate planning is essential to help ensure that your wishes are followed. Consider getting in touch with an estate planning attorney. He or she can work with you to understand your financial situation and help make sure your loved ones are taken care of down the road.
Source: The Washington Post, “Will the widow or the ex-wife get the money? Supreme Court to decide,” Diana Reese, April 22, 2013