Mistake Cost Loved Ones $400,000 of an IRA Inheritance

According to this Yahoo! article, Leonard Smith worked closely with his financial advisors and attorneys to ensure his children received the balance of his retirement funds after he died. Smith lost his battle with cancer in 2008. Unfortunately, a mistake ruined his plans. Smith’s family members noticed a year after his death that his IRA beneficiary form was filled out incorrectly. Smith did not list the names of his children along with percentages designated to each heir. He instead wrote, “To be distributed pursuant to my last will and testament,” where the disbursement was spelled out.

The document was not filled out correctly, which made his surviving spouse the beneficiary by default. Unfortunately, Smith’s children lost the court battle to recover the money. The IRA was awarded to their father’s wife, who married Smith two months before he passed away. Many Americans are unaware that long forgotten beneficiary forms that are not updated or filled out correctly can interrupt and dismiss a will and defeat the loved one’s intentions.

Of course it is imperative to fill out beneficiary forms correctly and to designate percentages. If your last will and testament designates one person as your beneficiary and your IRA says someone else, the IRA will override stipulation in your will. Always make sure that your forms are up-to-date. This mistake is way too common. Account holders sometimes forget to make necessary changes to these forms when major life changes occur.

So make sure to set aside valuable time to carefully read your beneficiary forms and ensure your loved ones do not become victims to this unfortunate mistake.

-Brittany Moore


Five Perfectly Legal Ways to Use Your Retirement Savings Early

Source: Matthew Frankel, The Motley Fool

As the term suggests, retirement savings are generally used once you reach retirement age — which the IRS defines as 59 ½ years or older. However, there are some special circumstances under which you might be able to use money in your retirement accounts early, and without paying an early withdrawal penalty. Some of these are specific to either a 401(k) or IRA account, and others apply to any retirement account.