I did enjoy reading the case of The Procter & Gamble U.S. Business Services Co. et al. v. Estate of Jeffrey Rolison et al., When Jeffrey started working at Procter & Gamble back in 1987, he named his girlfriend and cohabitant, Margaret Sjostedt as sole beneficiary to his 401k. Even though they split up in 1989 (and she later married and had kids), Jeffrey never changed his beneficiary. At the time of his untimely death in 2015, she was still named as beneficiary.
9 years ( and I cannot guess how much in lawyers' fees) later, the US District Court for the Middle District of Pennsylvania found in favor of Procter & Gamble. The Court ruled that Jeffrey had been given ample time and reminders to update his beneficiary and did not. Margaret inherited $754,006.54. In a humorous vein, one might wonder if her first thought was "Jeffrey who?" when Procter & Gamble informed her of the money but that amount of money can certainly refresh one's memory.
While it is easy to see this case as an isolated one, I have come across similar ones in my 34 years in the industry. In one case, a truck driver employee passed away. She was single but living with her girlfriend. She had not named a beneficiary.
What do we do here? Give it to the girlfriend? Relatives? I recall when the ex-girlfriend called to tell me that she and the truck driver were getting back together and that the current girlfriend was on the way out. Even better was when a woman from Texas called to say she was meant to get the money. To this day, I have no idea who she is.
Or how about the case of Sally from earlier this year? Sally named her husband, brother, and mom as beneficiaries on her 401k. The husband signed a document agreeing to that split. Guess what? The three of them cannot get along. The paperwork was challenging between all the finger pointing and shouting.
I could go on and on and on. As plan sponsors, please remind your employees frequently to check (and if need be, update their beneficiaries). If you are in HR and you see an employee is newly married or divorced, remind them to update the beneficiary designation.
As a 401k advisor, I start all of my group meetings with a beneficiary reminder. It does not matter the topic, I start with a beneficiary reminder. A recent talk on long-term care insurance began with a beneficiary reminder. The time to name beneficiaries is while you are still alive and kicking, not after the fact.
These cases can be horribly expensive (ie, Kennedy v DuPont went before the US Supreme Court) and time-consuming. I am sure they are not fun for either side. Avoid the time and expense by taking care of this now and monitoring/ changing as appropriate.