January 9, 2025 • 17 mins
In this episode of The Great Retirement Debate, Ed Slott and Jeff Levine debate whether its better to be a girlfriend, boyfriend or spouse when it comes to inheriting retirement assets.
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(00:00):
Hi, I'm Ed Slott and I'm Jeff Levine.
And we're two guys who just loveto talk about retirement and taxes.
Look, our mission is simple to educateyou, the saver, so that you can make
better decisions because better decisionson the whole lead to better outcomes.
And here's how we're going to do that.
Each week, Jeff and I will debatethe pros and the cons of a particular
retirement strategy or topic.
(00:22):
With the goal of helping you keepmore of your hard earned money.
At the end of each debate, there'sgoing to be one clear winner.
You!
A more informed saver who canhopefully apply the merits of
each side of the debate to yourown personal situation to decide
what's best for you and your family.
So here we go!
Welcome to the Great Retirement Debate!
(00:42):
So Jeff, here's an interesting story.
Actual tax court case, so thatshould pique your interest.
Alright, tell me, what's going on?
Well, here's a guy who worked for acompany for many years, and he left his
multi, well not multi million, one, onepoint something million, so a million
dollar plan, account balance, retirementaccount balance, to his ex girlfriend.
(01:04):
To his ex girlfriend?
Yeah, now, you might say,alright, you know, there might
have been something there.
Yeah.
He broke up with her in 1989.
It's a long time ago.
A very long time ago.
And in all those years, henever changed his beneficiary.
Never.
Even though the company asked him to.
As a matter of fact, it was so longago, in this case, they didn't have
(01:27):
really fancy beneficiary forms.
Yeah, I was going to ask whether hechisel his beneficiary into stone tablets?
Something like that.
It was actually written on a card,like an index card, a beneficiary form
card the company had at that point.
And they went, as they computerizedover the years, they sent him
notification after notification.
He just died.
So we're talking about many years ago.
(01:47):
Do you want to updateyour beneficiary form?
They said, because we're goingto a computerized format.
And if you don't.
Don't update it, we're going to assumewhat you had on that handwritten card,
that's your selection for beneficiary.
And he never changed it, he neverchanged it, he never changed it, well
now he's dead and she gets the money.
Now he died unmarried, so hehad no spouse and no children.
(02:11):
So why is there a court case?
Well, with a million dollars in aretirement account, you know people
are coming out of the woodwork.
Somebody's going to be upset about that.
His two brothers.
Ah.
Ah.
Ah.
And they said, no, this can't be whathe, what he broke up with her in 1989.
She can't possibly get the money.
The court says, yes, she gets the money.
They want, now where it stands,and who knows where it is, by
(02:33):
the time you see this, uh, couldchange a little, I don't think so.
They want to appeal it.
my position, my feeling, they will lose.
They will lose every case.
They even said that in this court case.
He had every chance tochange his beneficiary.
He opted not to do it.
That's right.
It was his money.
He can choose to do what he wants.
It's like that commercial.
It's your money.
Do with it what you want.
(02:54):
Yeah.
And that's what happened.
And now, I saw, when I saw thecomments to the article, uh, Wall
Street Journal ran an article on it.
They had tons of comments.
And they were in a bunch of camps.
Some camps was, sheshouldn't get the money.
Uh, you know, and she had ended up gettingmarried to somebody else and so forth.
That must have been aninteresting conversation.
(03:15):
Yeah, yeah.
Yeah, uh, yeah, I don't evenwant to go there, right.
And so that was part of the camp.
People said, uh, well, sheshouldn't get the money.
She's just not right.
And then the brothersshould get the money.
There is blood relatives more than her.
And in every case, uh,she's gonna get the money.
Yeah, I mean, it stands to reasonthat he's able to do what he
(03:37):
wants with his money, right?
And, and maybe it seems that if he wasintentionally passing on these things that
his true intent was to leave his money.
To his ex girlfriend.
Who knows?
Maybe they made some sortof crazy pact back then.
They said, if you know what, if neitherone of us finds love, we'll leave
each other our retirement accounts.
Well, that's what some people said,and what they said also, and I believe
(03:58):
it was in the court case, nobody knowswhat was, he's dead, nobody knows
what was in his mind, why he did that,but he, He purposely did not update
that card, that beneficiary card.
So now, she will get the money.
I don't care how many times they appeal.
My feeling is they're going to lose.
They'll just end upwasting money on attorneys.
Because this goes by operational law.
(04:20):
It's a contract.
Seems likely.
And this is a company plan.
They can't just say, youknow what, he's right.
She shouldn't get the money.
They have fiduciary liability.
Maybe they should decide whathe should do with his money.
Right, but by law they can't.
That's right.
They, you know, there's an ERISAplan and all of that, so speaking of
ERISA, this begs another question.
What if instead of being the exgirlfriend, She was his ex wife.
(04:45):
Well, if she was his ex wife, then aslong as they were married for at least
a year, that she would have had tohave been his beneficiary of the plan.
There would have been no choice.
Here, with an ex, like agirlfriend, a boyfriend, uh, you
know, anyone other than a spouse.
It's your choice who you wantto make your beneficiary.
But with ERISA plans, these aretypically 401ks, pension plans, etc.
(05:08):
You're, often times, if you're married,your spouse is your beneficiary right
away, but there is a rule that ERISA hasthat says, if you get married, the plan
can allow up to a year before that newspouse becomes the automatic beneficiary.
But they don't have to.
Uh, remember that one case with six weeks?
Uh, they don't, right, they don't have to.
The plan can wait, butthey don't have to allow.
(05:29):
That was the, uh, the Kiddercase from many years ago.
I think it was.
Yeah, yeah.
New spouse, six weeks.
That's right.
Six weeks after they were married,she killed, I mean, uh, died.
She mysteriously diedand she got the money.
Exactly.
Yes, yes.
After only six weeks.
So, uh, let's go back.
Let's say he was the ex spouse.
(05:49):
So let's say he left his ex wifeon the beneficiary for okay.
Now what would have happened?
Well, probably depends uponwhat state they live in, right?
Because many states upon divorce,you are automatically revoked unless
and it does happen from time to timeunless your ex spouse re-nominates
you as the beneficiary afterwards.
(06:11):
Yeah, a number of states, more than halfof them actually, have revocation upon
divorce laws, which means if you leftyour, you got divorced, and a big mistake,
very common mistake, you go through thedivorce and everything else, and you
forget to update your beneficiary form,and you leave now your ex spouse on there,
uh, In those states, she's, she or heis immediately removed as beneficiary.
(06:37):
Yeah.
Well, you know, those lawscome from somewhere, right?
Like a bunch of politicians forgot toupdate their beneficiaries afterwards.
And they said, no more, that's it.
We're going to makethis automatically law.
Right.
And in the, this was a Supreme Court case,by the way, that, uh, established this,
and even the justices, one of them said,and you could, uh, listen to the video,
(06:57):
uh, not the video, there's no video ofthe Supreme Court, but the audio you could
listen to, and one of them, uh, Uh, askthe question, but what if, how do we know
what exactly what I was talking about?
What was in his mind?
Maybe there was something there andhe purposely wanted to leave it to his
ex spouse and they all decided thatexactly what you said, that if that
was his intention after the divorce tomake sure your intentions are carried
(07:21):
out, you update the beneficiary form.
and name that ex spouse so everybodyknows that's what you wanted.
All right.
So if that's what you want.
So now I see what you're getting at interms of our initial question, is it
better to be, uh, you know, a girlfriendor a ex girlfriend or an ex wife had,
uh, with, with until you're married,there is no, like, unless you're married,
(07:44):
there is no automatic revocation.
You can live together.
You can be girlfriend,boyfriend, doesn't matter.
But unless you're married, Onceyou break up with that individual,
there is no automatic revocationof that beneficiary form, right?
So this is an unusual situationbecause the whole point of we we
call this an ERISA plan It's asay a 401k under the federal laws.
(08:09):
Spouses have huge protections.
Mm hmm.
And in almost everything the spouse isprotected Except in this scenario the
ex girlfriend got the million dollars.
Got the whole thing, not even half.
Right.
The whole thing.
Got all of it.
So she stood in a better positionthan being, than being married.
(08:29):
Makes me wonder, like, as you thinkabout that, like, what other areas
of the law, you know, are, are peoplebetter off being married or not married?
Uh, and, and just think of a few offtop of my head, right, as, as people
are thinking about, you know, again, notnecessarily directly related to that,
but if you're, committed relationshipversus being, let's say, married, which
(08:52):
also should be a committed relationship.
That's a good one.
You know what I mean.
If you're just, if you're together, yes.
Like a lot of people, especially as theyget older, they don't want to get married.
They've been married once already.
They want to keep things separate,but they like to be together.
There might be some advantages on theincome tax side of the equation because
if you're married and file a, a jointreturn, there can sometimes be a marriage
(09:14):
penalty on certain issues versus ifyou're separate and file single tax
returns, there can be a benefit there.
Uh, sometimes if an individual was marriedalready, they might be receiving certain
social security benefits from an exspouse, where if they get remarried, those
social security benefits might go away, soit might be better off for them to remain,
uh, separate as well, but it's interestingto think, are there certain times when
(09:38):
you'd be better off being not married,being a, again, a boyfriend or girlfriend
and maintaining that as a relationshipstatus versus actually being married.
Well, the point of this, uh,what I wanted to get to, is the
importance of a beneficiary form.
It's an ironclad contract.
And this is not the first of these cases.
I mean, this is one of thestrangest ones I've seen.
(09:59):
I mean you know, ex girlfriend from 1989.
That's when he broke up with herin 1989, and he just died recently.
But checking beneficiaryforms is critical.
It may be one of the singlebiggest mistakes people make.
You're familiar withother cases like this.
A lot of them are in the divorce area.
Remember the Kennedy case?
(10:20):
Sure.
Supreme Court case again.
Right.
Yep.
Yep.
Uh, the ex wife got, uh, gotthe money, even though she said
I, she waived her, her rights.
She was a liar.
Yeah, yeah, yeah.
And the daughter went to the court.
She said, but, but he didn't want to,he didn't want her to get the money, but
he didn't change the beneficiary form.
And they said the same thing in that case.
(10:40):
They said he had every opportunity tochange the form, but he chose not to.
So and she got, why did she get the money?
Well, because she was namedon the beneficiary form.
Right.
And also, you know, this is an ERISA case.
Uh, so, you know, you got tolook at updates in your life.
(11:01):
You got to, uh, you, you have tomake sure your beneficiary forms
say what you want them to say.
Going back to the ex girlfriend case,we don't know what he wanted, but
But apparently that's what he was.
He had numerous warnings or not warnings,uh, communications over the years from
the company over many, many years, overdecades, it would seem to me like even in
(11:21):
that case, if I was his advisor, right.
And he said, yeah, you know, Iknow this is weird, Jeff, but.
I've got this girlfriend from 1989.
And she's now married to somebody else.
And she's now married, she'snow married to someone else.
But I really want to leave her this money.
My advice still might have been, hey, whydon't we fill out a new beneficiary form?
Right, make it clear.
And just, that's right, makeit clear, remove any doubt.
(11:43):
You know, the beneficiary form iswhat controls the disposition of
assets most of the time, unless it'soverridden by some sort of federal
or state law, things like that.
But you know, the point is, this is likethe last act you have on this earth.
Like you're you're gone andthis is the last little bit.
I can't think of a worse scenario thanhaving your final wishes not fulfilled
because it either wasn't clear or becausethere was ambiguity and you left an
(12:06):
opportunity for someone else to interpretwhat you really wanted to happen.
Right, and you should look at,uh, activities in your life.
I call them life events when they'rebirth, a death, a marriage, a
divorce, a new grandchild, changeof tax laws, whatever it is.
These things should be updated.
They override the wills.
Oh, that was another thing.
When I said, uh, there were alot of comments online on the
(12:28):
article, people said he shouldhave said something in his will.
Yeah, but where there's a will,there's no way it's gonna work.
Right.
Yeah.
But these were some professionals on theresays if he should have said something
in the will that she doesn't get it,she still would have got it because the
beneficiary form overrides the will.
It's a strong document.
Now a little difference been if thiswas an IRA, you don't have to in
(12:52):
most cases or then maybe communityproperty leave to a spouse, right?
You could leave to anybody.
In fact, there's cases there where peoplehave taken their 401ks, move them to
an IRA And then name, let's say theirkids gotten remarried and said, sorry,
new spouse, you don't get the money.
It goes to my kids when I'm gone.
Because the ERISA laws protectingspouses do not apply in an IRA.
(13:14):
That's right.
Yep.
In fact, there's even cases onfile where, uh, people with, uh,
non-ERISA plans, things like 403Bs,don't get the same protection.
That's right.
There's that famous case, I don't know ifit was a case, but, uh, I think it was.
We used to refer to it, uh,matter of fact, I still use it.
It's from January 20, 2005.
From the New York Post.
(13:35):
Uh, it was called Pension Pickle.
We still give it out at our seminars.
I still remember the headline, BrokeWidower Loses $1 million to in-law.
Right.
Right.
You're a financial advisor, youcan't buy headlines that good.
I know, I know.
It was a great headline and, uh,you just have to see the headline.
So this woman worked, uh, you know,403B for the New York City school
system, accumulated a million dollars.
(13:56):
She died and, uh, she didn't,the spouse got disinherited.
He said, how could this possibly be?
Well, when she filled out her beneficiaryform, it was before she was married.
Years and years ago.
So, he wasn't even in the picture.
Who did she name?
Her brother or mother?
Her mother, her uncle,and her sister, I think.
(14:17):
Yeah, the brother.
The, the sister got the money.
The mother and the uncle,I think, uh, pre deceased.
Yep.
And the sister got the money becauseshe was on the beneficiary form.
He said, but I'm the spouse.
I've been married to her for years.
Well, she didn't updatethe beneficiary form.
Yeah, and, and I'm sure people are,again, you know, this is a confusing area.
People are saying, but wait, theywere married for more than a year.
What's the difference?
The difference is state andlocal 403Bs, like this one,
(14:40):
are not covered under ERISA.
Right.
You know, what, what seems as, youknow, As though it's so simple, you
know, hey, just write down a name ona piece of paper is actually dictated
by , a various number, a significantnumber of, of laws that all have, uh,
you know, strange interactions withone another where, you know, ERISA
overrides the beneficiary form, butstate, but beneficiary form overrides
(15:02):
the will, but state law can override, Imean, it, it's a very complicated mess.
And again, the challenge here is notthat it seems difficult and is difficult.
The challenge is it often seems simple,so people take for granted that what
they're doing or what they think they'redoing is actually going to happen,
when in reality they're not aware ofthe nuances and intricacies of the law
(15:23):
and that's when these mistakes occur.
Yeah, make sure to update.
forms, make sure you can find them.
I've seen problems recently with somemergers and financial planning firms
too, uh, where the documents don'tcarry over to the, uh, next institution
or they list the wrong beneficiary.
We just saw a case where theylisted the estate rather than the
(15:43):
name beneficiaries and there weremillions of dollars there and nobody
noticed it until the guy was dead.
Well, you can't change it after that.
Yeah, it looks, look anytime there'sa question about your beneficiaries,
there's a change in institution,a change in life events, etc.
Then, you know, I, I, Iadhere to one philosophy.
When in doubt, fill one out.
Oh, that's a good one.
(16:04):
Fill out a new beneficiary form.
That's it.
When in doubt, fill one out.
Yeah.
It can't hurt.
If you're saying the same thing, Allthat will happen is it'll be even more
clear that that was your intention.
And keep a copy because therecould even be a problem even if you
think the institution has a copy.
It may be an old copy, who knows,before they went through mergers or
transitions and things like that.
(16:25):
Yeah.
Well, update your beneficiary form.
Absolutely critical step as always.
Ed, thanks for updating us on that case.
That is a weird one for sure, buta great opportunity to learn from.
That's right.
Check your beneficiary forms.
Do it now.
That's right.
And we'll see you next time onThe Great Retirement Debate.
Jeffrey Levine is Chief PlanningOfficer for Buckingham Wealth Partners.
(16:46):
This podcast is for informational andeducational purposes only and should
not be construed as specific investment,accounting, legal, or tax advice.
Certain information mentioned maybe based on third party information
which may become outdated orotherwise superseded without notice.
Third party information is deemed tobe reliable, but it's accuracy and
completeness cannot be guaranteed.
The topic discussed in correspondingarguments are those of the speakers
(17:06):
and may not accurately reflectthose of Buckingham wealth partners.
Hi, I'm Ed Slott and I'm Jeff Levine.
And we're two guys who just loveto talk about retirement and taxes.
Look, our mission is simple to educateyou, the saver, so that you can make
better decisions because better decisionson the whole lead to better outcomes.
And here's how we're going to do that.
Each week, Jeff and I will debatethe pros and the cons of a particular
retirement strategy or topic.
(00:22):
With the goal of helping you keepmore of your hard earned money.
At the end of each debate, there'sgoing to be one clear winner.
You!
A more informed saver who canhopefully apply the merits of
each side of the debate to yourown personal situation to decide
what's best for you and your family.
So here we go!
Welcome to the Great Retirement Debate!
(00:42):
So Jeff, here's an interesting story.
Actual tax court case, so thatshould pique your interest.
Alright, tell me, what's going on?
Well, here's a guy who worked for acompany for many years, and he left his
multi, well not multi million, one, onepoint something million, so a million
dollar plan, account balance, retirementaccount balance, to his ex girlfriend.
(01:04):
To his ex girlfriend?
Yeah, now, you might say,alright, you know, there might
have been something there.
Yeah.
He broke up with her in 1989.
It's a long time ago.
A very long time ago.
And in all those years, henever changed his beneficiary.
Never.
Even though the company asked him to.
As a matter of fact, it was so longago, in this case, they didn't have
(01:27):
really fancy beneficiary forms.
Yeah, I was going to ask whether hechisel his beneficiary into stone tablets?
Something like that.
It was actually written on a card,like an index card, a beneficiary form
card the company had at that point.
And they went, as they computerizedover the years, they sent him
notification after notification.
He just died.
So we're talking about many years ago.
(01:47):
Do you want to updateyour beneficiary form?
They said, because we're goingto a computerized format.
And if you don't.
Don't update it, we're going to assumewhat you had on that handwritten card,
that's your selection for beneficiary.
And he never changed it, he neverchanged it, he never changed it, well
now he's dead and she gets the money.
Now he died unmarried, so hehad no spouse and no children.
(02:11):
So why is there a court case?
Well, with a million dollars in aretirement account, you know people
are coming out of the woodwork.
Somebody's going to be upset about that.
His two brothers.
Ah.
Ah.
Ah.
And they said, no, this can't be whathe, what he broke up with her in 1989.
She can't possibly get the money.
The court says, yes, she gets the money.
They want, now where it stands,and who knows where it is, by
(02:33):
the time you see this, uh, couldchange a little, I don't think so.
They want to appeal it.
my position, my feeling, they will lose.
They will lose every case.
They even said that in this court case.
He had every chance tochange his beneficiary.
He opted not to do it.
That's right.
It was his money.
He can choose to do what he wants.
It's like that commercial.
It's your money.
Do with it what you want.
(02:54):
Yeah.
And that's what happened.
And now, I saw, when I saw thecomments to the article, uh, Wall
Street Journal ran an article on it.
They had tons of comments.
And they were in a bunch of camps.
Some camps was, sheshouldn't get the money.
Uh, you know, and she had ended up gettingmarried to somebody else and so forth.
That must have been aninteresting conversation.
(03:15):
Yeah, yeah.
Yeah, uh, yeah, I don't evenwant to go there, right.
And so that was part of the camp.
People said, uh, well, sheshouldn't get the money.
She's just not right.
And then the brothersshould get the money.
There is blood relatives more than her.
And in every case, uh,she's gonna get the money.
Yeah, I mean, it stands to reasonthat he's able to do what he
(03:37):
wants with his money, right?
And, and maybe it seems that if he wasintentionally passing on these things that
his true intent was to leave his money.
To his ex girlfriend.
Who knows?
Maybe they made some sortof crazy pact back then.
They said, if you know what, if neitherone of us finds love, we'll leave
each other our retirement accounts.
Well, that's what some people said,and what they said also, and I believe
(03:58):
it was in the court case, nobody knowswhat was, he's dead, nobody knows
what was in his mind, why he did that,but he, He purposely did not update
that card, that beneficiary card.
So now, she will get the money.
I don't care how many times they appeal.
My feeling is they're going to lose.
They'll just end upwasting money on attorneys.
Because this goes by operational law.
(04:20):
It's a contract.
Seems likely.
And this is a company plan.
They can't just say, youknow what, he's right.
She shouldn't get the money.
They have fiduciary liability.
Maybe they should decide whathe should do with his money.
Right, but by law they can't.
That's right.
They, you know, there's an ERISAplan and all of that, so speaking of
ERISA, this begs another question.
What if instead of being the exgirlfriend, She was his ex wife.
(04:45):
Well, if she was his ex wife, then aslong as they were married for at least
a year, that she would have had tohave been his beneficiary of the plan.
There would have been no choice.
Here, with an ex, like agirlfriend, a boyfriend, uh, you
know, anyone other than a spouse.
It's your choice who you wantto make your beneficiary.
But with ERISA plans, these aretypically 401ks, pension plans, etc.
(05:08):
You're, often times, if you're married,your spouse is your beneficiary right
away, but there is a rule that ERISA hasthat says, if you get married, the plan
can allow up to a year before that newspouse becomes the automatic beneficiary.
But they don't have to.
Uh, remember that one case with six weeks?
Uh, they don't, right, they don't have to.
The plan can wait, butthey don't have to allow.
(05:29):
That was the, uh, the Kiddercase from many years ago.
I think it was.
Yeah, yeah.
New spouse, six weeks.
That's right.
Six weeks after they were married,she killed, I mean, uh, died.
She mysteriously diedand she got the money.
Exactly.
Yes, yes.
After only six weeks.
So, uh, let's go back.
Let's say he was the ex spouse.
(05:49):
So let's say he left his ex wifeon the beneficiary for okay.
Now what would have happened?
Well, probably depends uponwhat state they live in, right?
Because many states upon divorce,you are automatically revoked unless
and it does happen from time to timeunless your ex spouse re-nominates
you as the beneficiary afterwards.
(06:11):
Yeah, a number of states, more than halfof them actually, have revocation upon
divorce laws, which means if you leftyour, you got divorced, and a big mistake,
very common mistake, you go through thedivorce and everything else, and you
forget to update your beneficiary form,and you leave now your ex spouse on there,
uh, In those states, she's, she or heis immediately removed as beneficiary.
(06:37):
Yeah.
Well, you know, those lawscome from somewhere, right?
Like a bunch of politicians forgot toupdate their beneficiaries afterwards.
And they said, no more, that's it.
We're going to makethis automatically law.
Right.
And in the, this was a Supreme Court case,by the way, that, uh, established this,
and even the justices, one of them said,and you could, uh, listen to the video,
(06:57):
uh, not the video, there's no video ofthe Supreme Court, but the audio you could
listen to, and one of them, uh, Uh, askthe question, but what if, how do we know
what exactly what I was talking about?
What was in his mind?
Maybe there was something there andhe purposely wanted to leave it to his
ex spouse and they all decided thatexactly what you said, that if that
was his intention after the divorce tomake sure your intentions are carried
(07:21):
out, you update the beneficiary form.
and name that ex spouse so everybodyknows that's what you wanted.
All right.
So if that's what you want.
So now I see what you're getting at interms of our initial question, is it
better to be, uh, you know, a girlfriendor a ex girlfriend or an ex wife had,
uh, with, with until you're married,there is no, like, unless you're married,
(07:44):
there is no automatic revocation.
You can live together.
You can be girlfriend,boyfriend, doesn't matter.
But unless you're married, Onceyou break up with that individual,
there is no automatic revocationof that beneficiary form, right?
So this is an unusual situationbecause the whole point of we we
call this an ERISA plan It's asay a 401k under the federal laws.
(08:09):
Spouses have huge protections.
Mm hmm.
And in almost everything the spouse isprotected Except in this scenario the
ex girlfriend got the million dollars.
Got the whole thing, not even half.
Right.
The whole thing.
Got all of it.
So she stood in a better positionthan being, than being married.
(08:29):
Makes me wonder, like, as you thinkabout that, like, what other areas
of the law, you know, are, are peoplebetter off being married or not married?
Uh, and, and just think of a few offtop of my head, right, as, as people
are thinking about, you know, again, notnecessarily directly related to that,
but if you're, committed relationshipversus being, let's say, married, which
(08:52):
also should be a committed relationship.
That's a good one.
You know what I mean.
If you're just, if you're together, yes.
Like a lot of people, especially as theyget older, they don't want to get married.
They've been married once already.
They want to keep things separate,but they like to be together.
There might be some advantages on theincome tax side of the equation because
if you're married and file a, a jointreturn, there can sometimes be a marriage
(09:14):
penalty on certain issues versus ifyou're separate and file single tax
returns, there can be a benefit there.
Uh, sometimes if an individual was marriedalready, they might be receiving certain
social security benefits from an exspouse, where if they get remarried, those
social security benefits might go away, soit might be better off for them to remain,
uh, separate as well, but it's interestingto think, are there certain times when
(09:38):
you'd be better off being not married,being a, again, a boyfriend or girlfriend
and maintaining that as a relationshipstatus versus actually being married.
Well, the point of this, uh,what I wanted to get to, is the
importance of a beneficiary form.
It's an ironclad contract.
And this is not the first of these cases.
I mean, this is one of thestrangest ones I've seen.
(09:59):
I mean you know, ex girlfriend from 1989.
That's when he broke up with herin 1989, and he just died recently.
But checking beneficiaryforms is critical.
It may be one of the singlebiggest mistakes people make.
You're familiar withother cases like this.
A lot of them are in the divorce area.
Remember the Kennedy case?
(10:20):
Sure.
Supreme Court case again.
Right.
Yep.
Yep.
Uh, the ex wife got, uh, gotthe money, even though she said
I, she waived her, her rights.
She was a liar.
Yeah, yeah, yeah.
And the daughter went to the court.
She said, but, but he didn't want to,he didn't want her to get the money, but
he didn't change the beneficiary form.
And they said the same thing in that case.
(10:40):
They said he had every opportunity tochange the form, but he chose not to.
So and she got, why did she get the money?
Well, because she was namedon the beneficiary form.
Right.
And also, you know, this is an ERISA case.
Uh, so, you know, you got tolook at updates in your life.
(11:01):
You got to, uh, you, you have tomake sure your beneficiary forms
say what you want them to say.
Going back to the ex girlfriend case,we don't know what he wanted, but
But apparently that's what he was.
He had numerous warnings or not warnings,uh, communications over the years from
the company over many, many years, overdecades, it would seem to me like even in
(11:21):
that case, if I was his advisor, right.
And he said, yeah, you know, Iknow this is weird, Jeff, but.
I've got this girlfriend from 1989.
And she's now married to somebody else.
And she's now married, she'snow married to someone else.
But I really want to leave her this money.
My advice still might have been, hey, whydon't we fill out a new beneficiary form?
Right, make it clear.
And just, that's right, makeit clear, remove any doubt.
(11:43):
You know, the beneficiary form iswhat controls the disposition of
assets most of the time, unless it'soverridden by some sort of federal
or state law, things like that.
But you know, the point is, this is likethe last act you have on this earth.
Like you're you're gone andthis is the last little bit.
I can't think of a worse scenario thanhaving your final wishes not fulfilled
because it either wasn't clear or becausethere was ambiguity and you left an
(12:06):
opportunity for someone else to interpretwhat you really wanted to happen.
Right, and you should look at,uh, activities in your life.
I call them life events when they'rebirth, a death, a marriage, a
divorce, a new grandchild, changeof tax laws, whatever it is.
These things should be updated.
They override the wills.
Oh, that was another thing.
When I said, uh, there were alot of comments online on the
(12:28):
article, people said he shouldhave said something in his will.
Yeah, but where there's a will,there's no way it's gonna work.
Right.
Yeah.
But these were some professionals on theresays if he should have said something
in the will that she doesn't get it,she still would have got it because the
beneficiary form overrides the will.
It's a strong document.
Now a little difference been if thiswas an IRA, you don't have to in
(12:52):
most cases or then maybe communityproperty leave to a spouse, right?
You could leave to anybody.
In fact, there's cases there where peoplehave taken their 401ks, move them to
an IRA And then name, let's say theirkids gotten remarried and said, sorry,
new spouse, you don't get the money.
It goes to my kids when I'm gone.
Because the ERISA laws protectingspouses do not apply in an IRA.
(13:14):
That's right.
Yep.
In fact, there's even cases onfile where, uh, people with, uh,
non-ERISA plans, things like 403Bs,don't get the same protection.
That's right.
There's that famous case, I don't know ifit was a case, but, uh, I think it was.
We used to refer to it, uh,matter of fact, I still use it.
It's from January 20, 2005.
From the New York Post.
(13:35):
Uh, it was called Pension Pickle.
We still give it out at our seminars.
I still remember the headline, BrokeWidower Loses $1 million to in-law.
Right.
Right.
You're a financial advisor, youcan't buy headlines that good.
I know, I know.
It was a great headline and, uh,you just have to see the headline.
So this woman worked, uh, you know,403B for the New York City school
system, accumulated a million dollars.
(13:56):
She died and, uh, she didn't,the spouse got disinherited.
He said, how could this possibly be?
Well, when she filled out her beneficiaryform, it was before she was married.
Years and years ago.
So, he wasn't even in the picture.
Who did she name?
Her brother or mother?
Her mother, her uncle,and her sister, I think.
(14:17):
Yeah, the brother.
The, the sister got the money.
The mother and the uncle,I think, uh, pre deceased.
Yep.
And the sister got the money becauseshe was on the beneficiary form.
He said, but I'm the spouse.
I've been married to her for years.
Well, she didn't updatethe beneficiary form.
Yeah, and, and I'm sure people are,again, you know, this is a confusing area.
People are saying, but wait, theywere married for more than a year.
What's the difference?
The difference is state andlocal 403Bs, like this one,
(14:40):
are not covered under ERISA.
Right.
You know, what, what seems as, youknow, As though it's so simple, you
know, hey, just write down a name ona piece of paper is actually dictated
by , a various number, a significantnumber of, of laws that all have, uh,
you know, strange interactions withone another where, you know, ERISA
overrides the beneficiary form, butstate, but beneficiary form overrides
(15:02):
the will, but state law can override, Imean, it, it's a very complicated mess.
And again, the challenge here is notthat it seems difficult and is difficult.
The challenge is it often seems simple,so people take for granted that what
they're doing or what they think they'redoing is actually going to happen,
when in reality they're not aware ofthe nuances and intricacies of the law
(15:23):
and that's when these mistakes occur.
Yeah, make sure to update.
forms, make sure you can find them.
I've seen problems recently with somemergers and financial planning firms
too, uh, where the documents don'tcarry over to the, uh, next institution
or they list the wrong beneficiary.
We just saw a case where theylisted the estate rather than the
(15:43):
name beneficiaries and there weremillions of dollars there and nobody
noticed it until the guy was dead.
Well, you can't change it after that.
Yeah, it looks, look anytime there'sa question about your beneficiaries,
there's a change in institution,a change in life events, etc.
Then, you know, I, I, Iadhere to one philosophy.
When in doubt, fill one out.
Oh, that's a good one.
(16:04):
Fill out a new beneficiary form.
That's it.
When in doubt, fill one out.
Yeah.
It can't hurt.
If you're saying the same thing, Allthat will happen is it'll be even more
clear that that was your intention.
And keep a copy because therecould even be a problem even if you
think the institution has a copy.
It may be an old copy, who knows,before they went through mergers or
transitions and things like that.
(16:25):
Yeah.
Well, update your beneficiary form.
Absolutely critical step as always.
Ed, thanks for updating us on that case.
That is a weird one for sure, buta great opportunity to learn from.
That's right.
Check your beneficiary forms.
Do it now.
That's right.
And we'll see you next time onThe Great Retirement Debate.
Jeffrey Levine is Chief PlanningOfficer for Buckingham Wealth Partners.
(16:46):
This podcast is for informational andeducational purposes only and should
not be construed as specific investment,accounting, legal, or tax advice.
Certain information mentioned maybe based on third party information
which may become outdated orotherwise superseded without notice.
Third party information is deemed tobe reliable, but it's accuracy and
completeness cannot be guaranteed.
The topic discussed in correspondingarguments are those of the speakers
(17:06):
and may not accurately reflectthose of Buckingham wealth partners.
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