When your 401(k) has a bad heir day

By Jason Zweig, Wall Street Journal

Even where there is a will, there can be a won't.

It is a little-understood situation:  After a lifetime of saving, what ultimately happens to your individual retirement, 401(k) and other retirement savings often hinges on what you scribbled down decades earlier, as you filled out a form designating your beneficiaries.

If you haven't updated that paperwork to reflect how your life has changed, you might not be able to leave your wealth you your heirs as you wish.  Instead you could bequeath them with a bureaucratic nighmare.

Estate attorneys point out that most American believe their retirement savings will be divided according to the instructions in their will - like their other assets.  In fact, who inherits the money is usually determined by the language on the beneficiary-designation forms that most people have long since forgotten or lost.

If you mistakenly leave a former spouse designated as a beneficiary of your 401(k), he or she will generally be entitled to the assets upon your death - even if those assets were excluded from the divorce settlement.

If your adult child dies before you and you don't change your beneficiary forms, that child's heirs will typically be cut out of any bequest you mean to give them.  Your retirement assets will be divided among your other children - cutting off one branch of your family.

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As always, consult with your attorney and financial advisor.

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association.