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.
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