Check your beneficiary designations
Jeffrey and Margaret were in their 20s when they met in a park and began dating. They moved to Sullivan County, Pennsylvania, living together while Margaret waitressed and Jeffrey got a job at Proctor and Gamble. In 1987, Jeffrey signed up for P&G’s profit sharing and savings program. He listed Margaret as his beneficiary, stating that she was a “cohabitor.”
Two years later, the couple broke up. According to Margaret, it was because she wanted marriage and children, he did not. Margaret soon did marry and have children.
Jeffrey remained unmarried and childless throughout his life. He lived with a new partner, Mary Lou, for several years, until 2014. During that time he designated his mother and Mary Lou as beneficiaries of his life insurance. After his mother died, Mary Lou was the sole beneficiary.
Jeffrey died in 2015, at age 59, a few months before he planned to retire. His largest asset was the P&G retirement fund, then worth some $750,000. He had never changed his beneficiary designation. And he never made a will.
Under ERISA, beneficiary designations control who receives retirement accumulations after the owner dies. Jeffrey’s brothers, as executors of his estate, did not believe that he wanted all this money to go to an ex-girlfriend. P&G asked a federal court to decide who would get the money. The brothers alleged that P&G had violated its fiduciary duties by not getting Jeffrey to change his beneficiary designation, but the court noted that forms sent to Jeffrey over the years repeatedly admonished him to check this issue. The most recent court ruling was in favor of Margaret, but the brothers announced that they will appeal.
What if Jeffrey had made a will? A will does not normally overrule a beneficiary designation for insurance proceeds or retirement benefits, so it might not have prevented this litigation. However, it could have provided some insight into Jeffrey’s intentions for the funds—perhaps he really did want Margaret to be the beneficiary of the retirement fund, which had grown to over $1 million by 2020. Had Jeffrey consulted an estate planning lawyer, the lawyer likely would have advised him to take steps to remove all ambiguity about his wishes, including a more forceful recommendation to check the beneficiary designations.
Nine years after Jeffrey’s death, the retirement money is still being held in escrow.
(July 2024)
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