Family Sticks Together To Protect Unnamed Beneficiary

Q. My brother passed away suddenly 5 months ago. He had no will and had recently gotten married. He had been an executive with a large company and when employed 10 years ago named my father as the beneficiary of his 401k and simply forgot to change it to his wife.

My father got the surprise call from the HR dept. that he was the beneficiary. I am trying to assist him as he is in poor health and in no position to make financial decisions. Who should we contact? Shouldn't this money automatically go to his wife?

A. My condolences for your brother's passing. It must be very difficult for you, his wife and other family.

When someone dies without a will it is called dying intestate and each state has their own rules for intestate succession. Therefore the laws of the state will determine to whom his probatable estate will be passed. Assets that have beneficiaries named, such as the 401(k), are not a part of the probatable estate because they pass directly to the beneficiary.

You will want to talk with an estate attorney. Most states have provisions that will allow the wife to get something. In Tennessee, the wife would only receive 40% of the estate if they had been married for at least 10 years.

Your father has the ability to 'disclaim' his interest in the 401(k). That means that he is denying his right to receive it. In that case the 401(k) will go to the contingent beneficiary. If there isn't one then it will become a part of his probatable estate and thus a portion of it can pass to his wife. The problem is that the 401(k) will be taxable in this situation because it will no longer be considered a 401(k), so a big chunk of it will immediately go to taxes.

I'm not sure how big your brother's estate is, but whoever does receive his assets can always then gift money to his wife. Each individual can gift up to $11,000 per year without any Federal tax issues. Check to see if there will be any gift taxes at the state level.

Q. Thank you so much for your response and kindness. My brother lived in Chicago and my father in Ohio. I will take your advice and help my father get an attorney. The amount of the 401k is $150,000. My brother was married only 2 years to a wonderful woman who cared for him quite well. In my heart I feel that he would have wanted her to have all of his money and items (over 1 million in real estate, huge savings acct) or a tiny portion for the education of his 2 young nephews and charitable causes. My father (the beneficiary) is very well off and was named beneficiary because at the time he was the closest relative. Lesson here..........young healthy people still need wills!!! You can be sure my husband and I have taken care of that! There is no financial hardship in our family so it doesn't really matter but I'm sure with better planning a big chunk of taxes could have been avoided.

Do you have a branch in Ohio? We have no financial planner here and could use some assistance. We have done our wills and trusts, living will and power of attorney but I'm not certain we have all our ducks in a row. My husbands company has a legal plan we used and although the attorney was very kind and pleasant ~ he did not personalize our documents (used a "template" for our docs.)

Thank you again and if you have an office here or a recommendation I would happily support your efforts.

A. I have about 30-40 clients that I work for and over 50% of my clients are outside the state of TN. With phone and email, distance isn't much of an issue. For instance, I have a couple in Montana that I've never met in person that I've been doing financial planning for about 2 years.

I will be happy to help you and your family (father, sister-in-law, etc.). Feel free to send me questions just like you initially did. Also, it will be helpful for you to email me copies of any investment statements and your wills.

Initially, the most important thing will be to verify that your estate documents accurately reflect your wishes. From there we would verfiy that you have the right amount and proper kind of life insurance and then look at your investments. Many times people have too much or the wrong kind of insurance and you end up not using that money wisely.

It might be that you just need a review of you situation with recommendations of simple changes you should make. It may be that you need/want some investment management. If so, we can talk further about what I do, what it costs, etc.

Does that sound like a plan?

If so, let me know more about your situation. Kids ages, first/second marriage, any grandchildren, annual income, occupations, value of home, real estate investments, etc.

Let me know what you will want to happen if you/your husband pass away and I will verify your wills reflect that.

Your posted comments on this and other questions are welcome.
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