Failing to keep current on plan beneficiaries can spoil your estate planning. A pension plan member neglected to name anyone to replace his spouse as a beneficiary after she died, even though his intention was to leave his entire estate to his two stepsons.
The plan provided that if someone dies without a beneficiary, benefits are paid to the surviving spouse, children, parents and siblings, in that order. After his death, the plan paid out his benefits to his siblings and not to his stepsons, because the stepsons weren’t his biological or legally adopted kids.
An Appeals Court decided this interpretation of the plan was reasonable (Herring v. Campbell, 5th Cir.). Similar problems can arise if your IRA beneficiary dies before you do and you die without naming a replacement beneficiary. In that situation, your heirs will be stuck with a much shorter distribution period to clean out your account.
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