As part of our firm’s tax preparation and tax planning consultations, we periodically advise our clients to check on who is named as beneficiaries on their pension, IRA and insurance policies. Why is this so important? A NY Post headline in 2005 was titled “Pension Pickle – Broke Widower Loses $1M to In-Law”. The facts were quite simple. Husband did not inherit his deceased wife’s $900,862 lump-sum payment because it was paid out to her sister. His sister-in-law refused to give him any of the inherited money (he claimed to be penniless). While the couple was married for almost 20 years, it was discovered upon the wife’s death that she had named her mother, uncle and sister as her beneficiaries. The beneficiary form had been completed four years before the couple had met. Since the wife’s mother and uncle were deceased, the entire pension benefits were paid to her sister. This unfortunate situation could easily have been averted if the married couple had only periodically reviewed their beneficiary forms.
Individuals experience life events such as marriage, divorce, births of children, deaths of close relatives, adoptions, etc. which may necessitate a change in beneficiaries. As the “Pickle case” illustrates, it is extremely important that the named beneficiaries are periodically reviewed. Parties who can insist you with this task include your estate planning attorney, financial advisor, insurance agent, and your tax professional.
If you want to learn more about the taxation of beneficiaries, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
