Recent Case Highlights Significance of Precise, Detailed Retirement Plan Beneficiary Designations, Nov. 14, 2019

A recently decided case underscores the importance of beneficiary designations in avoiding disagreement over post-death distribution of retirement plan assets. The case involved three IRAs--two small IRAs and one large IRA. Originally, the account owner designated his romantic partner as primary beneficiary of all accounts. Later, he sent a change of beneficiary form to his account custodian at UBS on which he wrote four people's names and "25 percent" next to each name. Although his partner was one of the names, he wrote a friend's name on the line designated "primary beneficiary". UBS rejected the form, claiming it was unclear. Then the account owner suddenly died without additional clarification. UBS disputed the change in beneficiary with respect to the large IRA because it never received proper forms and eventually distributed the smaller IRAs in four equal proportions. After a nearly three-year dispute, the owner's partner was awarded the entire large IRA. Importantly, this case reminds advisors that clients may need help filling out beneficiary designation forms--and that the exact form specified by the financial institution should be used. For more information on the importance of beneficiary designations, visit Tax Facts Online.