Be Aware Of The Principle Of The “Operation Of Law”
Fri Aug 14, 2009, 7:30 am | Leave Comment
Let’s see what the “operation of law” principle is. Just as an example, say you designate your spouse as the beneficiary of your retirement accounts (IRA, 401(k), etc.). Years later, you get divorced and update your will to specify that your account money should go to your adult children. By that act alone, without changing designated beneficiary, the money will go to your ex-spouse by operation of law. The fact that your will specifies to the contrary makes no difference.
How to rectify
Changing of your will and designated beneficiary should go together. You change one, you change the other if you so desire. You should always check your retirement account beneficiary designations anytime you update your will.
Don’t make the assumption
Many individuals assume that their will provides all of the necessary information about the disposition of assets at death, including those from retirement plans. But in fact, the designated beneficiary forms filed with your accounts will take precedence over your will. The reason is that a retirement account is not generally considered a part of an estate.
In a Nutshell
When you open an IRA or sign up to participate in a retirement savings plan through your employer, you should have completed a designated beneficiary form. The most common beneficiaries are spouses, children or other family members. Also, visit this process repeatedly every year or two and make changes if you so desire.
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