Financial advisors enjoy helping investors see how well prepared they might be for the good, the bad, and the ugly. Sometimes it isn't the market that can cause things to turn out ugly. Bad things can happen, for example, when investors get so busy with life that they forget to simply review their beneficiary designations. It is surprising to see how many investors today who have not updated who they want their money to go to after they won't need it anymore. It brings to mind the 2-day classes that accountants and financial advisors have taken over the years taught by a friend who has been called America's IRA expert, Ed Slott, CPA. This is a true story from which we can all take notes.
Things happen when we assume
The class case study included a 1/3/05 article in the New York Post where a broke widower lost nearly $1M to his sister-in-law. The Brooklyn man says he was left in poverty after his wife's pension valued at almost $1 million was given to her sister instead of to her husband. He had hoped the Manhattan Supreme Court would decide to change the primary beneficiary from Anne Friedman's sister, Virginia McLaughlin to her husband,Bruce Friedman. Age 61 at the time, Mr. Friedman said, speaking of his wife Anne, "I lost the best thing that ever happened to me. I had no idea there was a question I wasn't the beneficiary."
Actually, there wasn't a question about the beneficiary. For nearly 20 years Bruce and Anne were happily married. Anne was a former city school principal who died suddenly of a massive heart attack in 2001. Mr. Friedman never doubted he was entitled to the lump-sum payment of $908,862 from the Teachers' Retirement System. Unfortunately Mr. Friedman never checked, nor did he see the annual statements that indicated his wife had named no beneficiary. It would appear that Bruce was Anne's closest relative as well as her primary beneficiary.
Trust, but verify
After Anne died, officials discovered a form which had been filled out 27 years before the issue arose, which was also 4 years prior to the couple meeting on a blind date in 1978. It showed that Anne's mother, uncle, and sister were the primary beneficiaries. Since Anne's mother and uncle had passed away, the money was awared to her sister. Bruce complained that she won't give him a dime. Last we heard was that Bruce was just making ends meet.
New York's highest court ruled that Anne's intention of making her husband the beneficiary could not be assumed and that the paperwork on file was clear. The Supreme Court's decision was upheld by the Appellate Division in December, 2004.
Friedman's lawyer, Sanford Young remarked that the decision was "sobering." He went on to say, "Make sure you update your pension beneficiary forms. If you don't, your spouse and family may wind up with nothing."
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