Keep Those Beneficiary Designations Updated!

I have been doing some research on Federal preemption of California community property law by ERISA. If you are still awake after reading that, you'll love what's next:

In Emard v. Hughes Aircraft the Federal Ninth Circuit Court of Appeals held that ERISA law does not preempt California community property law. While that might not move you to dance in the streets with joy, consider the facts of the case. Wife married Husband 1 in 1975 and named him as the beneficiary of the life insurance policy she received from her job at Hughes Aircraft in 1981. Wife and Husband 1 divorced in 1985. Wife then married Husband 2 in 1986. She never changed her beneficiary designation even though she purchased additional insurance through Hughes while she was married to Husband 2 (that means Husband 1 was the named beneficiary on the new policy as well). Wife died in 1995 without an estate plan. Husband 2 sued Husband 1, among others, to get the benefits of the life insurance policy she purchased while married to Husband 2.

This case is significant not because of the issue of federal ERISA preemption, but because it shows what a mess can be created if you do not keep your beneficiary designations current. Think of how much in attorneys fees were generated in suing for the benefits, losing, and then appealing.

Remember: you should review your designations every year, and certainly when you get married, divorced, widowed, or when you have children. This is probably not the first thing on your mind when these events occur, but the consequences of ignoring it can be pretty serious.