Date: 9/26/2008 5:32 PM
By DAVID PITT
AP Business Writer
DES MOINES, Iowa (AP) _ Financial planners say it happens all too frequently: a person dies unexpectedly leaving ex-spouses or relatives they haven’t seen in years large chunks of money because they hadn’t updated their retirement plans or life insurance policies.
It’s a problem that you can try to head off at the pass this open enrollment season. But be aware that for most insurance and retirement accounts, changes can be made any time and do not require you to wait for your annual benefits selection.
It’s important to keep beneficiary designations current because a lot is at stake. Collectively, the amount of money held in retirement accounts in the United States is large and growing.
The Employee Benefit Research Institute said IRA assets grew 12.5 percent to $4.75 trillion in 2007.
Private-sector defined contribution plans including 401(k) accounts held $3.5 trillion, and private-sector defined benefit plans held $2.33 trillion in 2007.
Many people may believe that an updated will is sufficient to take care of any financial issues left behind, but that’s not the case, said Rande Spiegelman, vice president of financial planning at the Schwab Center for Financial Research, a division of Charles Schwab & Co. Inc.
Retirement plan assets and life insurance benefits generally go directly to the named beneficiaries, and those survivors likely will have their money before a will is processed in probate court.
Many people have multiple life insurance policies and retirement funds from different employers and forget to update beneficiaries. So, if you’ve divorced and your first wife is still the beneficiary on a life insurance policy, there could be a problem for other survivors who may be depending on the benefits.
“This is probably not one of those things that’s the top priority for most folks,” Spiegelman said.
He recommends reviewing beneficiary declarations on retirement accounts and insurance policies every two to three years. They also should be reviewed when major life changes occur such as a birth, death of a family member, a divorce or a move to another state.
Some advisers recommend an annual review to keep the policies and accounts as up-to-date as possible.
Accounts that may have beneficiary designations include individual retirement accounts — 401(k), 403(b), or 457. Self-employed accounts such as a Keogh or qualified retirement plan. Credit union plan accounts, disability insurance policies, life insurance policies and annuities also have beneficiary forms. Also think about beneficiaries for accounts at brokerages, he said.
As a practical matter, most married people will name their spouse as the primary beneficiary and their children as contingent beneficiaries if the primary isn’t still living.
Spouses have certain benefits when it comes to inheriting a retirement account. They can roll the money over into their own retirement account or keep it in a separate account and defer taking out any money until they turn 70½ — when they must take required minimum distributions. A spouse also has the option of taking the money out in distributions over his or her lifetime, taking advantage of the tax-deferred status of the account.
It’s important to note that federal law makes your spouse the default beneficiary on the retirement account through your employer such as a 401(k). Someone other than your spouse can be named the beneficiary only if you authorize it and your spouse signs a release form.
For unmarried people, parents, other family members, domestic partners or others close to them may be chosen as beneficiaries.
Failure to name beneficiaries means the money goes into your estate and becomes part of the probate process, which means the cash will be tied up in a court process and some of it will be lost to the expenses of the probate process.
Some people have made the mistake of naming their estate as the beneficiary, which again locks up the assets in court-managed probate.
In a few cases, an individual may want to name a trust as the beneficiary, which places the money in control of a trusted money manager. It’s an option if you believe the beneficiaries of your money may not have the skills to handle it.
Marvin Feldman, president and CEO of the Washington-based Life and Health Insurance Foundation for Education, a nonprofit group formed by insurance companies, said a trust might be important if you decide to leave the money to a minor child.
The trust would be named as the beneficiary of your money and the person you name to manage it, the trustee, would be responsible for distributing funds to your child in the way you establish in the trust documents.
Sometimes trustees are given some flexibility to make distribution decisions as needed but within parameters you establish.
Trusts may also be an option if you’re divorced with minor children and former spouse has custody of the children. A trust would ensure that the money you leave is used to support the child’s needs.
Copyright 2008 The Associated Press.
Court: Relatives who assist in suicide can inherit
Date: 9/25/2008 5:10 PM
By RYAN J. FOLEY
Associated Press Writer
MADISON, Wis. (AP) _ The wife and daughter of a man who committed suicide can inherit his estate even if they assisted him in the act, a state appeals court ruled Thursday.
State law prohibits anyone who “intentionally kills” another from inheriting from the person, but Wisconsin’s District 4 Court of Appeals said that provision does not apply to those who assist in suicide.
“Providing (the man) with a loaded shotgun did not deprive him of his life: he deprived himself of life by shooting himself with the shotgun,” Judge Margaret Vergeront wrote for the unanimous three-judge panel.
Wisconsin Right to Life, which opposes assisted suicide, said the ruling gives people a financial incentive to help relatives die prematurely.
“It’s a horrendous decision,” said Barbara Lyons, the group’s executive director.
“I think the implications are enormous,” she said.
Boston College law professor Ray Madoff, an expert on inheritance law, said she has never heard of a similar ruling in the nation.
“This is something that people have been curious about where the law would draw the line, and it’s interesting to actually have a case addressing it,” she said.
Edward Schunk, 63, shot himself in 2006 in a cabin on his property while he was terminally ill with non-Hodgkin’s lymphoma, a form of cancer. He left an estate valued at nearly $500,000.
The court ruled in favor of his wife, Linda, and youngest child, Megan Schunk, now 20, who were granted most of the estate under Schunk’s will.
Schunk’s six older children received little or nothing, according to court records. Five of them challenged the will, arguing that Linda and Megan Schunk took Schunk to the cabin, gave him a loaded shotgun and left even though they knew he was suicidal.
The two acknowledged they took him home from the hospital on a one-day pass but denied assisting his death. They said he had told them he wanted to go turkey hunting.
For the purposes of deciding the dispute, the court assumed the other children’s allegations were true but still ruled in favor of the wife and younger daughter.
Under Wisconsin law, assisting in a suicide is punishable by up to six years in prison. Thursday’s ruling did not address that law, and no one has been charged in Schunk’s death.
Terry Moore, lawyer for Megan Schunk, called the case a “one-in-a-million situation” and said he doubted it would have broad impact. Lawyers for Schunk’s other children did not immediately return phone messages. They could ask the Wisconsin Supreme Court to review the case.
Boston College’s Madoff said courts often struggle with whether someone who kills another should be allowed to inherit their money, she said. It’s an easier question when dealing with murder but more difficult in instances such as drunken driving, self-defense against spousal abuse or assisted suicide, she said.
Copyright 2008 The Associated Press.
By RYAN J. FOLEY
Associated Press Writer
MADISON, Wis. (AP) _ The wife and daughter of a man who committed suicide can inherit his estate even if they assisted him in the act, a state appeals court ruled Thursday.
State law prohibits anyone who “intentionally kills” another from inheriting from the person, but Wisconsin’s District 4 Court of Appeals said that provision does not apply to those who assist in suicide.
“Providing (the man) with a loaded shotgun did not deprive him of his life: he deprived himself of life by shooting himself with the shotgun,” Judge Margaret Vergeront wrote for the unanimous three-judge panel.
Wisconsin Right to Life, which opposes assisted suicide, said the ruling gives people a financial incentive to help relatives die prematurely.
“It’s a horrendous decision,” said Barbara Lyons, the group’s executive director.
“I think the implications are enormous,” she said.
Boston College law professor Ray Madoff, an expert on inheritance law, said she has never heard of a similar ruling in the nation.
“This is something that people have been curious about where the law would draw the line, and it’s interesting to actually have a case addressing it,” she said.
Edward Schunk, 63, shot himself in 2006 in a cabin on his property while he was terminally ill with non-Hodgkin’s lymphoma, a form of cancer. He left an estate valued at nearly $500,000.
The court ruled in favor of his wife, Linda, and youngest child, Megan Schunk, now 20, who were granted most of the estate under Schunk’s will.
Schunk’s six older children received little or nothing, according to court records. Five of them challenged the will, arguing that Linda and Megan Schunk took Schunk to the cabin, gave him a loaded shotgun and left even though they knew he was suicidal.
The two acknowledged they took him home from the hospital on a one-day pass but denied assisting his death. They said he had told them he wanted to go turkey hunting.
For the purposes of deciding the dispute, the court assumed the other children’s allegations were true but still ruled in favor of the wife and younger daughter.
Under Wisconsin law, assisting in a suicide is punishable by up to six years in prison. Thursday’s ruling did not address that law, and no one has been charged in Schunk’s death.
Terry Moore, lawyer for Megan Schunk, called the case a “one-in-a-million situation” and said he doubted it would have broad impact. Lawyers for Schunk’s other children did not immediately return phone messages. They could ask the Wisconsin Supreme Court to review the case.
Boston College’s Madoff said courts often struggle with whether someone who kills another should be allowed to inherit their money, she said. It’s an easier question when dealing with murder but more difficult in instances such as drunken driving, self-defense against spousal abuse or assisted suicide, she said.
Copyright 2008 The Associated Press.
