Retirement Plan Beneficiary Designation Controls Despite Will Provisions


“Estate planning” means more than just preparing and signing a will. The families of Donald and Mary Perkins learned that even when a will is in place, there still may be problems.

Mr. and Mrs. Perkins had both been married before. Each of them had three children from their prior marriages. Mr. Perkins worked as a bus driver in Shreveport, Louisiana, where he had a company life insurance policy, a pension plan benefit and a 401(k) account.

The couple presumably thought they had completed their estate plan. They had both signed wills, and those wills were perfectly valid. Each provided that, in the event of simultaneous death, they would be deemed to have survived the other.

In September, 1996, Mr. and Mrs. Perkins were riding a motorcycle when they were struck head-on by a truck. Both died instantly, and so neither one survived the other. This was the exact possibility their wills addressed, and so it seemed that Mr. Perkins’ property would pass to his three children, and Mrs. Perkins’ share would go to her three children.

Much of Mr. Perkins’ estate, however, was tied up in the three benefit plans at his place of employment. His 401(k) plan named one daughter, Allecca Perkins Tucker, as the alternate beneficiary in case his wife did not survive him. The life insurance plan named all three of his children as alternate beneficiaries.

Mr. Perkins’ retirement plan, however, was a little different. It named his wife as primary beneficiary, but named his brother as alternate beneficiary if his wife “should die before” him.

Despite the clear language of Mr. Perkins’ will, the question of entitlement to his benefits ended up in Louisiana Federal Court. When the ruling there was appealed, the U.S. Fifth Circuit Court of Appeals ended up resolving the issue.

Although non-lawyers may think that a will disposes of all property, the courts recognized that Mr. Perkins’ beneficiary designations controlled who would receive his life insurance and retirement benefits. The court pointed to the clear language of the alternate beneficiary designations on his life insurance and 401(k) plan, and awarded the former to all of Mr. Perkins’ children and the latter to the one daughter named as alternate beneficiary. The retirement plan’s beneficiary designation, however, was interpreted naming his wife because she had not died before him—those proceeds went to his wife’s estate and, ultimately, to her three children. Tucker v. Shreveport Transit Management, Inc., September 14, 2000.

The moral: an estate plan is not complete when a will (or even a trust) is signed. Beneficiary designations and “pay on death” (POD) or “in trust for” (ITF) account titling can change your estate plan. A coordinated estate plan should consider not only those types of accounts, but also “transfer on death” (TOD) accounts, joint tenancy property and other titling issues.

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