Four of Douglas Fairbanks, Sr.'s best friends were told they would be remembered in his will, so they were surprised when the document did not mention them. Sixty days after his father's death, Douglas Fairbanks, Jr. produced an envelope containing a supplementary will that left them $60,000 each.
Yes, financial planning can be complicated, and even seemingly simple tasks are fraught with pitfalls. Getting it right requires understanding the rules, paying attention to details, and having a deep commitment to reviewing and updating.
Fairbanks, Sr. had his joke, but it is no joke when your heirs do not receive assets as you intend. The following three real-world examples in just one area of planning—beneficiary designations—illustrate why having a skillful eye on your affairs is so important.
Recently, a friend of BWFA was disinherited due to the new policy. His grandmother had two identical accounts with different beneficiary designations at Vanguard. Our friend was a designated beneficiary on the older account, which was changed by Vanguard. Unfortunately, he continues to battle for his inheritance.
We called Vanguard, and it seems they have backed away from this policy. Several representatives said that we can open two or more accounts of the same type and have different beneficiary designations. However, if you are one of the 170,000 customers who had multiple accounts of the same type, call Vanguard at 877-662-7447, and find out what designations you have!
We also called T. Rowe Price and learned that it adopted the policy in 2007, but it will allow customers to have different beneficiary designations for the same type of IRAs.
The Employee Retirement Income Security Act (ERISA), which governs 401(k) plans, requires spousal consent for a plan participant to be able to name a beneficiary other than the spouse. ERISA permits plans to waive the spousal consent if the participant is married less than a year. Leonard Kidder's 401(k) plan did not have this waiver available. Therefore, his children did not receive their inheritance.
When William died in 2001, a dispute arose over whether Kari or Liv was the rightful owner. The U.S. Supreme Court decided unanimously that the beneficiary designation trumped the divorce agreement and ruled in favor of Liv Kennedy's estate (she died in 2007) as the beneficiary.
