Beneficiary Designations-Livingston, NJ Tax & Business Law (973)-994-9080
Many types of investments permit the owner to designate a
specific individual (my spouse or domestic partner) or class of individuals (my children, if living, otherwise their issue, my grandchildren, per stirpes) to inherit the asset
upon the death of the insured or owner. These include, but are not limited to IRAs, 401(k)s, 403(b)s, life insurance and annuity policies, POD (Pay on Death) accounts, and accounts opened by a parent or grandparent "IN TRUST FOR" a designated child or grandchild.
In doing estate planning, it is very important to
be aware of such designations, and in the absence of any such designation, to
recognize that almost every contract provides that the asset will pass to the
It is critical that you discuss beneficiary designations
with a person who is helping you prepare an estate plan.
I had a client who had a Will prepared by another attorney.
The Will provided that upon my client’s death, his assets would be held in
trust for the benefit of his wife (provided she survived him), and upon the
death of his wife, all that remained would go to the University of Pennsylvania from where he graduated.
All of the client’s assets were either owned jointly
with his wife, or designated his wife as the beneficiary. The client/husband
died first, which resulted in his wife receiving all his assets and the
University of Pennsylvania receiving nothing. None of the client's assets passed
under the terms of his Will (as probate assets). All of the client’s assets were transferred by
operation of law to the surviving joint tenant (his wife), and by way of the beneficiary
designations on his IRA, and annuities. Not his intent.
A writer at Forbes Magazine recently published an article relating a case in VA where husband, a former employee of the Federal government, who had a life insurance policy at the time of his early demise that designated his first wife (he had been married three times) as the beneficiary. While VA law, like NJ law, states that upon the entry of a final judgment of divorce any such designation becomes null and void (especially if the Property Settlement Agreement (PSA) states otherwise, but as this was a policy issued under Federal law, VA law did not govern and the designated beneficiary, the decedent's first wife, per Federal law, was entitled to the death proceeds. This decision was affirmed by the U.S. Supreme Court. (The litigation costs had to exceed the $100,000+ value of the policy.)