The most important form in all of employee benefits is an individual employee’s life insurance and/or 401(k) plan beneficiary form(s). In the absence of a valid beneficiary form on file with the plan administrator, the life insurance and 401(k) plan documents will often control the distribution of plan proceeds upon an employee’s death. Unfortunately, the varied distribution protocols outlined in different life insurance and 401(k) plan provider documents are often contrary to what one might expect would be the distribution protocol, possibly resulting in my being required to advise a plan to pay the proceeds to an unintended individual (e.g., a former spouse) or to the deceased employee’s estate. In other words, the distribution of large sums of money could potentially be against the deceased employee’s wishes. The best way to avoid this issue is to make sure that an individual employee’s life insurance and 401(k) beneficiary form(s) exist, is current, and matches any estate planning documents.
Below are two very common scenarios with possible unintended beneficiaries:
To avoid claim disputes and potential litigation, we recommend that all beneficiary forms be reviewed and updated at least annually and after all change of life events (birth, marriage, divorce, death of a beneficiary, etc.). The best way for an employee to express his/her wishes is to ensure that an updated beneficiary form is on file with all employer-sponsored (and individual) life insurance plans and the 401(k) plan if any other individual or entity other than the employee’s spouse is the intended beneficiary.
Please contact Frank Del Barto or your relationship attorney with any questions.
©2023 Masuda, Funai, Eifert & Mitchell, Ltd. All rights reserved. This publication should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended solely for informational purposes and you should not act or rely upon information contained herein without consulting a lawyer for advice. This publication may constitute Advertising Material.