Keeping Your Estate Plan Current

Setting up an estate plan isn’t enough – remember to review and update it periodically to ensure that it consistently reflects your wishes.

In 2013, the U.S. Supreme Court issued a ruling that sent a clear message how important it is to keep your estate plan up to date. The case centered on a dispute between the widow of Warren Hillman and his ex-wife. Hillman, a federal employee, owned a Federal Employees Group Life Insurance (FEGLI) policy with a death benefit of $124,558. Hillman neglected to change the beneficiary designation on the policy following his divorce and remarriage, and when he passed away in 2008 his ex-wife Judy Maretta collected on the policy. Hillman’s widow, Jacqueline Hillman, sued to recover benefits.

The subsequent court battle lasted five years. The widow argued that Virginia law revokes a divorced spouse’s beneficiary in favor of a widow or widower (Va. Code Ann. §20–111.1(A)), but the Court ruled that a federal employee’s choice of beneficiary cannot be overridden by a state statute. Hillman’s ex-wife was therefore entitled to keep the money.

The importance of checking your beneficiary designations

Many people fail to keep track of their named beneficiaries and this often backfires. In my own practice, I have had quite a few clients who were surprised with what they found when I reminded them to check their life insurance and retirement account beneficiary designations – like Hillman, one man had his ex-wife listed. Thankfully, we caught the oversight in time for his to fix it!

Everyone should periodically check their life insurance policies and retirement accounts and make sure that they name not only a primary beneficiary, but also an alternate/contingent beneficiary who will collect the proceeds if your primary beneficiary dies before you.

If you pass away without a living designated beneficiary on a life insurance policy or retirement account, the account will be paid out to your estate and will be subject to probate. Your estate will not only incur unnecessary probate fees, but your beneficiaries will be unable to roll over any retirement proceeds to their own retirement accounts – as a result, additional taxes may be assessed on the distribution.

Updating your estate plan

When your living trust is established, it should be accompanied by a list of assets. It is essential that you update this list at least once a year, and that you review all of your documents every few years to ensure that they consistently reflect your wishes. Your estate planning documents and beneficiary designations should be updated after every major life event, such as:

  • Marriage
  • Divorce
  • Birth or adoption of a child or grandchild
  • Illness, disability or death of a spouse, child or other relative
  • Receipt of a large gift or inheritance, opening or closing a business, buying or selling a house or other major asset, or any other major change in assets and investments
  • Death or change in circumstance of your executor, trustee, or named guardian of minor children.

California estate planning attorneys

The estate planning and tax attorneys at Moskowitz, LLP can help you modify your existing estate plan or develop a new one that meets your specific needs. Call our San Francisco offices at (888) 829-3325 for more information.