Courts Reiterate: Beneficiary Designation Review Is Critical for Estate and Retirement Planning

Olshan Employee Benefits and Tax & Personal Planning partner Stephen Ferszt authored an article in New York Law Journal entitled “Courts Reiterate: Beneficiary Designation Review Is Critical for Estate and Retirement Planning.” Olshan Tax & Personal Planning associate Alexander Sanchez-Figueroa assisted with the article. The article details the importance of updating beneficiary designations for employer-sponsored retirement plans, deferred compensation arrangements and group life insurance policy documents. Updating beneficiary designations is often ignored in the wake of significant life events such as marriage, divorce, the birth of a child or even the death of a loved one. The article cites a particular case where, after a romantic relationship ended, the policyholder never updated his forms to remove his onetime-girlfriend, who became the sole beneficiary years later upon the policyholder’s death. “These cases underscore the critical, yet frequently overlooked, importance of regularly reviewing and updating beneficiary designations,” the authors write. “Remedies such as the imposition of a constructive trust or enforcement of divorce order may be available but can only be sought after the proceeds have been distributed by a plan administrator to the designated beneficiary—and through what may likely be a costly and lengthy court battle.” To avoid such circumstances, they recommend keeping beneficiary designations current. It is crucial to consult financial and legal professionals as part of this process to properly and preemptively think through your own estate planning: “Adhering to the specific procedures set forth in the plan for designating or changing beneficiaries is not just a formality, but an essential step in ensuring that your assets are distributed according to your wishes.”