How long has it been since you updated your beneficiary list? When you sign up for TMRS, life insurance, ICMA-RC or any other bank or investment account, you are required to list a beneficiary to receive the proceeds should you pass away. Oftentimes, people fill out the form and maybe forget about which beneficiary is on which account. It is so very important to always check your beneficiaries after a life changing event such as death, marriage, divorce, etc.
In hindsight, that seems to have been the case for the example listed below:
John Doe, a retired government employee had been married three times. During his second marriage, he signed up for a life insurance policy and enrolled in TMRS. He listed his then-wife, Jane, as the beneficiary. Later, he divorced and remarried. Then John died.
Among the non-probate assets he left behind was his TMRS account valued at $54,234 and life insurance policy valued at $20,000. Because he forgot to update his beneficiary designations, ex-wife Jane received the benefits; not the current wife.
The Beneficiary Battle – Who Wins
Normally, when a person who passes away neglects to update their beneficiary designations, the state can step in to help. There is no way to predict how the courts will rule. If a deceased person's marital status changed, but the contract does not reflect that change, many state statutes revoke the old beneficiary designation for the current spouse. But not always.
In John’s case, his widow used this argument in state court to try to recover the benefits; but the case didn't end there. In Supreme Court of the United States case, Doe vs. Smith, the Court sided with Jane Smith (ex-wife) rather than Mary Doe (current wife).
The Importance of Updating Your Beneficiary Designations
While a relatively uncommon situation, Doe vs. Smith illustrates how important it is to update your beneficiary names. What is common is that assets go to people we don't intend because many people have outdated beneficiaries on record. Review your beneficiary designations and safeguard your family's financial future.
What's the best rule of thumb?
Check your beneficiary designations from time to time to make sure they are what you intend them to be. Review estate planning documents every three to four years. Most importantly, revise accounts after a divorce or significant life change. If you are unsure how you make changes, it's best to contact human resources or your financial institution help.
NOTE: If you are vested with TMRS (member for 5 years or more) you MUST complete a Vested Beneficiary form and send to TMRS. You can make this change on their website, TMRS.org. You may also send to Fannie Layer. Failure to complete the form could tie your account up in the courts for months.
Life Insurance Beneficiary designationBeneficiaries for Final check in case of deathBeneficiaries for Final check in case of death (fire or police)ICMA-RC Beneficiary Designation formTMRS Vested Beneficiary Form