Ex-wife inherits IRA! To avoid accidentally enriching your ex-spouse, you should review your entire estate plan every three to five years, whenever you have a major life change, and when you turn 65.

Ex-Spouse Inherits IRA!

 

This happened in real life to Newman Trowbridge, Jr. His story illustrates how easy it is for something to fall through the cracks in your estate plan. Mr. Trowbridge was an experienced and intelligent lawyer who opened his own Individual Retirement Account (IRA) in 1994. After his divorce, he managed his accounts and updated some, but not all, of his beneficiary designations. Trowbridge died unexpectedly in 2009. Prior to his death, Trowbridge remarried but never updated the beneficiary designation on his IRA. When he died, his ex-wife inherited everything in the IRA account, including the balance of his law firm's profit sharing plan which he had rolled over into his IRA.  The roll-over quadrupled the balance in Trowbridge’s IRA account! Sadly, Mr. Trowbridge’s widow received nothing from the IRA. (For more on Newman Trowbridge’s IRA, see https://www.forbes.com/sites/billsinger/2011/05/17/estate-wife-ira-divorce/#13a5a002de56)

Accidental inheritances can happen to anyone, no matter how astute or successful they are. There are far too many cases where an old  beneficiary designation gives a windfall to a long lost relative, former friend, or worse yet, an ex-spouse simply because someone forgot to review and update their estate plan periodically. The only way to prevent accidental inheritance is to keep your estate plan current.

How often should you update your estate plan to prevent accidental inheritance? Here are a few triggering events that should prompt you to review your estate plan and a general rule of thumb to keep your estate plan up to date.

Update your estate plan if any of the following occur.

1. Marriage or divorce

2. The birth or adoption of a child or grandchild

3. The opening or closing of a business you own

4. A change in your health or the health of your spouse, child or significant other

5. A move to a new state

6. The adoption of pets you want to provide for when you’re gone

7. Retirement

Additionally, you should review your estate plan at least every 3 to 5 years to ensure your beneficiaries and beneficiary designations are correct and up-to-date. When reviewing your estate plan, don’t forget to review your retirement accounts, bank accounts, CD’s, stock, life insurance policies, investment accounts, deeds, and even the title to your car. After your review, you should be able to answer these questions. Who are your beneficiaries? Are the beneficiaries on your life insurance policy joint or contingent beneficiaries? Do you know whether your bank accounts have rights of survivorship or pay-on-death beneficiaries? Do you still want the people listed on these accounts to inherit from you? It’s so easy to forget who you listed on that insurance policy years ago or that your ex-spouse is still on your 401{k).

The only way to know your estate plan is up to date is to review it every three to five years or when you have a major life change. If you are over 65 and haven't looked at your estate plan for a few years, take it out and review it. Keep your attorney and financial planner in the loop regarding your estate plan and any major life changes. Meet with them as often as necessary to make sure everything is up to date.

Need help with your estate plan? Contact Nancy’s assistant at 704-887-5242 and ask to schedule a time to come in and meet with Nancy.

 

Nancy Roberts
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