Everyone is aware of the need for conducting periodic maintenance on their cars and their homes, or undergoing periodic checkups for their health. But what about your estate plan? Simply adopting a “create it and forget it” approach to estate planning, with no checkups, can sometimes be harmful to your estate plan’s well-being, as one case going before the U.S. Supreme Court, Hillman v. Maretta, highlights.
In 1996, Warren Hillman named his wife, Judy, as the primary beneficiary on his Federal Employees’ Group Life Insurance (FEGLI) policy. Two years later, the couple divorced. Warren remarried in 2002. Warren and his subsequent wife, Jacqueline, remained married until Warren died in 2008. However, Warren’s insurance policy beneficiary designation remained unchanged from when he created it in 1996, leaving ex-wife Judy as the named beneficiary.
Both women filed claims for the $124,000 policy benefit. Hillman’s ex-wife ultimately received the payout, because the policy named her as the intended death beneficiary. Jacqueline sued, contending that, under Virginia law, Warren and Judy’s divorce triggered an automatically revocation of the beneficiary designation in favor of Judy. The Virginia Supreme Court, however, ruled for the ex-wife, deciding that federal statutes governing FEGLI trumped Virginia law, and required giving first priority to “the beneficiary or beneficiaries designated by the employee,” which, in this case, remained the ex-wife. Under the federal law, Judy’s relationship to Warren was irrelevant.
The wife appealed the ruling and the U.S. Supreme Court has agreed to take the case. What makes the facts of this case such a cautionary tale is that the dispute, and subsequent protracted litigation, was entirely avoidable. There are many common mistakes people make with estate planning, with the chief one being never creating a plan at all. However, even those who create a plan fall into traps too often, with the Hillman case hinting at two of those.
First, it is vital to realize that your estate plan encompasses more than just your will and/or revocable trust. In addition, it also includes your life insurance policies, as well as other assets that have designations transferring them at the occasion of your death (such as a bank account with a pay-on-death designation or real estate with a transfer-on-death deed, among others.) Second, it is essential to remember that you must maintain your estate plan to make it work properly, just like your body. Certain occurrences necessitate a trip to the doctor. Similarly, certain life events, like divorce, remarriage, death of a spouse, or birth or adoption of a new child, just to name a few, require checking with your estate planning attorney to see if your plan is still functioning properly, or if changes are in order.
A popular series of commercials by a major insurance provider encourages customers to undergo a “double-check” to search for additional cost savings on their policy premiums. Similarly, submitting your estate plan to a periodic “double-check” is also extremely important, as it may prevent an outcome from occurring after your death that you never intended or desired. Our Premium Trust Package clients have checkups every 3 years to be sure they have things covered.
To advise you regarding your estate plan checkup, you should seek the assistance of a knowledgeable Wisconsin estate planning attorney. Daniel J. Krause, with Krause Law Offices LLC, can help you ensure that you have an estate plan that continues to meet your needs.
Contact us through our website or by calling our office at (608) 268-5751 to schedule your confidential, no obligation initial consultation.
Don’t Forget About Estate Issues When Getting Divorced, Wisconsin Probate & Estate Planning Blog, Dec. 20, 2012
Your Wisconsin Estate Plan Should Include Much More Than a Will, Wisconsin Probate & Estate Planning Blog, Oct. 9, 2012
Estate Plan Modifications in Wisconsin, Wisconsin Probate & Estate Planning Blog, June 20, 2012