Beneficiary Designations

The day Bob got hired to work for Acme, Inc. he went through a bunch of paperwork with the HR office.  He signed some forms about his health insurance, maybe an employee manual, his group life insurance beneficiary, and maybe his 401k or retirement beneficiary.  He probably named his wife, Wilma, as the primary beneficiary and his kids Scooter and Skippy as the contingent beneficiaries. At the time, 1989, that may have been fine.

The problem is things happen that we don’t expect. 1989 was the year that the Oakland A’s and the San Francisco Giant’s played in the World Series. That wasn’t expected. Either was the earthquake, during a game, that resulted in substantial devistation throughout Northern California. However, stuff does happen… and in my world that stuff is often death or divorce.

In Bob’s case he and Wilma got divorced in 2001. It was a brutal divorce. He felt Wilma got way more assets than she should have.  It might be fair to say that Bob hated Wilma.

Fast forward to 2011, Wilma married the 22 year old tennis pro at the club, Wilma dis-owned her kids, and then Bob died.  Bob had built his 401k back up, after the divorce, and at the time of his death it was $450,000. He also had a $150,000 group life insurance policy at work. He wanted the money to go to his kids as he felt horrible about things had gone. He may have even prepared a will that said his kids get all his assets.

However, Bob made a fatal mistake in estate planning. He never checked who is death beneficiary was on his 401k or his life insurance. He simply forgot. He was so busy working and raising the kids that he forgot.

Guess who gets all that money?

The evil ex-wife, Wilma, gets all the money.  Sure there are provisions in the probate code to invalidate that transfer but what if Wilma collects the money before Scooter and Skippy realize it? What if she and the 22 year old tennis pro take the money and move to South America?

The simple point is when you do your estate plan check your beneficiary designations. Even if you are sure who the beneficiary is check it anyway!

Powers of Attorneys and Trusts

The other day I was talking to a new client and he told me that he recorded his financial power of attorney with the county because he “had to since he has real estate.”  I can only imagine where he got this advice but it’s just simply wrong. It’s wrong for so many reasons. I should clarify he is a new client of mine so he did not get his bad advice from me!

First of all why would you ever want to record an estate planning document which includes all of your family member’s names unless you have to?  Though I am not overly concerned about my privacy I certainly do not go out of my way to publish my private information for the world to see when I don’t have to.

Second of all the recording could be done when the document was needed… IF it was ever needed.

Third for a power of attorney to be able to deal with real estate the power of attorney would have to be a “specific power of attorney” which mentions the real property specifically. That is, at a minimum, the address of the parcel needs to be listed and it probably should have the legal description as well like a deed.

Lastly, this client has a trust and the power of attorney has absolutely nothing to do with trust assets. It’s the trust that would deal with a trust asset.  Though this is the last point it’s probably the most important and the one people confuse the most.  Trusts deal with assets that are actually owned by the trust.  Powers of attorney, though similar to a trust, are totally different and only deal with assets that are not in the trust.

I encourage you to find a new attorney if your attorney gave you similar advice that this client received from his former attorney!


Ratings and Reviews

10.0John Bernard Palley
Wealth Counsel Member
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