Now that tax season is done for the most part and everyone who could and wanted to contributed to their IRA’s for 2014 have completed that I would like to really focus on a piece that many of us overlook. Many of us are just so busy we forget to do the little things like make sure our beneficiaries are up to date. This is a big issue and can dramatically effect what your “plans” may have been or even cause additional tax issues for someone without knowing.
Just to give you a real example I had a colleague go through:
Mr. Smith (not his real name) had an old 401k that he left behind at his old employer (I never recommend this, for many reasons, I can go in to details at a later time). At the time, Mr. Smith was married Mary (not her real name) . Well eventually Mr. Smith and Mary get divorced. Mr. Smith remarries and marries a lady name Beth (not her real name). Mr. Smith died and when Beth went to claim his old 401k, to her surprise Mary was still named as beneficiary. Mr. Smith had even gone as far as having a Trust and Will so Beth thought there would be no issue. Here is where the problem arises. 401k are monitored by ERISA which has federal oversight. The clients trust and Will are drafted and valid in the state of residence for the most part. Federal law trumps State and local laws. As you can see, Beth was very disappointed and this was not the intention of Mr. Smith.
Let me help you review your portfolios but also make sure your beneficiaries are correct and up to date.