If you like gambling with cards, don’t carry that over to your designated IRA or Retirement fund beneficiaries. We all know a full house trumps a straight in poker. But did you know this, a Retirement form trumps a Will or Trust? That’s right. If you are considering the designation of your Retirement fund in a Will don’t waste the ink. It won’t work. There are cases in which a divorcee failed to change his or her Retirement fund beneficiary from a now divorced spouse.
Subsequently, that individual, we will call him Sam, indicates in his newly created Trust, that he is leaving his entire estate, including retirement funds, to his two children in equal shares. On Sam’s death, the Custodian of his Retirement funds contacts, Sally, the ex-spouse, and indicates she is the legal beneficiary. Sam’s Successor Trustee claims that Sam, subsequently executed a Trust, leaving his estate including the retirement funds to his children in equal shares.
This could become a case of “Texas Holdem” with the Custodian withholding the funds awaiting a Court order. But usually the Custodian will pay the ex-spouse in accordance with the IRA/Retirement Fund (401K, 403b, etc.) contract which requires payment to the designated beneficiary as a part of the Custodian’s obligation.
Moral of this story is: Treat your beneficiary designation forms as important as your Trust and Will in these matters- REMEMBER, THE RETIREMENT FORM RULES!