Wednesday, June 5, 2024

It’s 10 O’clock – Do You Know Who Your Beneficiaries Are?

           Having a will is an important step in directing what is to happen to your assets when you die. Ensuring all of your accounts have current beneficiary information properly submitted is also key. Financial accounts and insurance policies provide the option to list beneficiaries. Even if you do not have a will (Call us!), you have the opportunity to add beneficiary information to your financial accounts.

            Estate of Finley v. Allen, 2024 WL 2484466 is a good reminder that the step of adding or updating beneficiaries should be made thoughtfully and sooner rather than later.  In Finley, the Appellate court concurred with the trial court in finding for the listed beneficiary despite Ms. Finley sending an email three days before her death requesting the grandson be removed as beneficiary.  According to the Court:

“On January 19, 2022, Ms. Finley designated her grandson, William C. Finley, II, (“William”), as the sole beneficiary of her … retirement plan accounts (collectively referred to as “the accounts”) held by the investment firm Morgan Stanley Smith Barney (“Morgan Stanley”).  The beneficiary designation was accepted by Morgan Stanley after Ms. Finley completed the proper paperwork and it was received by Morgan Stanley per the terms of the TOD agreement.

On May 9, 2022, Ms. Finley emailed her Morgan Stanley financial advisor, Rick Morgan (“Mr. Morgan”), seeking to revoke William’s designation as sole beneficiary, and designating in his place her daughters Ingrid Allen (“Ingrid”) and Ilse Dehner (“Ilse”) as beneficiaries.  Mr. Morgan attempted to contact Ms. Finley to discuss her request, but was unsuccessful.  Ms. Finley died three days -2- later on May 12, 2022, having not submitted the TOD beneficiary designation form to Morgan Stanley.

Ilse was designated as executrix of Ms. Finley’s estate.  She presented a proposed final settlement to the Scott County probate court, in which she designated herself and Ingrid as beneficiaries of Ms. Finley’s Morgan Stanley accounts.  According to her counsel, she did this to carry out her mother’s wishes as evinced in Ms. Finley’s email to Mr. Morgan.

As a result, Ingrid and William filed the instant action … against Ilse, the estate, and Morgan Stanley seeking a declaration of rights.  They asserted in relevant part that Ms. Finley’s apparent attempt to change the beneficiaries on her account was not successful because she did not comply with Morgan Stanley’s requirement that a change of beneficiary form must be properly submitted and received before it is given effect.  Ilse counterclaimed, arguing that Morgan Stanley breached its contract with Ms. Finley by failing to carry out her request to change the beneficiaries.

The matter … [culminated] in the order granting William and Ingrid’s motion for a declaratory judgment.  The court ruled in relevant part that Morgan Stanley had specific requirements to change beneficiaries; that Ms. Finley was aware of those requirements and had complied with them when designating beneficiaries in the past; that her email to Mr. Morgan did not substantially comply with the requirements; and, that the failure to comply resulted in William remaining as beneficiary at the time of Ms. Finley’s death.”

            Despite Ms. Finely’s attempts to change the beneficiary back to her daughters, the courts held that the proper process was not followed and that “although the disposition in her will could constitute evidence of her subjective intentions, the making of the will was not enough to comply with the policy’s procedures.”

            While the standard of review for this matter relied upon Kentucky and New York law only, it is a good reminder to double-check who you have listed as the beneficiary on your financial and insurance accounts. Putting thought into this now and making sure you understand the beneficiary change process at your respective financial and insurance providers may very well save loved ones from contentious legal wrangling and ensure your wishes are properly recorded and followed.

No comments:

Post a Comment