Organization and periodic review are two topics that should always be associated with the creation and maintenance of a proper estate plan. Without these two practices, it is all too easy for the wishes of a New Jersey resident to fall by the wayside. Over the course of a lifetime, many individuals will obtain a wide variety of assets, including various insurance policies. Ensuring that the beneficiaries for those assets are up-to-date is an essential aspect of good estate planning. Absent such measures, the division of one’s estate can be left in the hands of a probate court.
An example is found in the estate of a man who passed away in 2011. The man had purchased two life insurance policies in 1999 and named the same three beneficiaries for each policy. However, within the same policy, he made note of his plan to establish a trust that would then become the beneficiary of the policies, and that the same three people would then become the beneficiaries of that trust. Later that year, the man made the change and designated the trust as the beneficiary of both policies.
The man then married in 2001 and remained married until his death in 2011. At that point, confusion arose over who was entitled to the life insurance policies. No one was able to locate documentation that a trust was ever created. Furthermore, when he changed the beneficiary to the trust, the man had included a clause in his policies that explicitly revoked any previous beneficiary designations and failed to name any contingent beneficiaries.
When the matter went before the court, the judge in the probate case ruled that these actions had effectively cut out those three beneficiaries from the estate. Instead of granting the death benefit to the individuals who were originally listed as beneficiaries, the court gave those funds to the man’s widow. Of course, there is no way to know for sure if this is the outcome that the man would have wanted. However, had he simply kept his estate-planning documents organized and made periodic assessments of the provisions within, he would likely have realized that he did not finish creating the trust as intended, or that the beneficiaries who were once named were now cut out of any form of inheritance. The case serves as a reminder to all New Jersey residents of the importance of reviewing one’s documents from time to time.
Source: nevadaappeal.com, “John Bullis: Keep beneficiary information up to date”, John R. Bullis, March 9, 2015