A girlfriend, a piece of paper, and a million dollars

A man from suburban Philadelphia made a casual oversight in the 1980s that could wind up costing his family a million dollars.

A recent article in the Philadelphia Inquirer tells the story of Jeffrey Rolison, who started a job at Procter & Gamble and enrolled in the company’s 401(k) plan in 1987. Not being married, he listed his girlfriend, Margaret Sjostedt, on the beneficiary form. Two years later, the couple broke up, but Jeffrey never bothered updating that beneficiary form. He died in 2015, just before he had planned to retire.

Today, 37 years after Jeffrey scribbled her name on a company form, Margaret stands to inherit her old boyfriend’s seven-digit retirement account. Jeffrey’s brothers have been challenging the case in court for nearly a decade – arguing that there’s no way he would have wanted to leave his nest egg to someone he stopped dating in 1989 instead of his brothers, nieces, and nephews – but unless their argument somehow prevails, the court stands ready to honor that original beneficiary form.

I’ve seen it happen in my own family. A divorce, the death of a designated beneficiary, or some other life event happens, and in the blur of the moment someone forgets to update a form.

You can name a beneficiary – and you should – on your 401(k), IRAs, Roth IRAs, pensions, and other retirement savings plans. Same with life insurance and annuities. You can accomplish a similar objective with bank accounts and non-IRA investments with designations such as “payable on death (POD)” and “transfer on death (TOD).” In addition to ensuring that your assets go where you want them to go when you die, beneficiary designations allow those transfers to bypass probate.

Most financial firms allow you to name one primary beneficiary or several. As a backup, you can add one or more contingent beneficiaries as well. And you can change your beneficiaries anytime and as often you want.

But know this: your beneficiary designation nearly always supersedes any other intentions you state in a will, trust, or other legal agreement – regardless of when you stated those intentions.

Every year or two – or whenever something substantial changes in your life – review your beneficiary designations. Update them in writing if necessary. And don’t assume your financial institution keeps perfect records; keep a copy of everything in your own files.

Beneficiary designations should be one of the cornerstones of planning your legacy. A qualified estate attorney can coordinate your wishes within a comprehensive estate plan and advise you on other strategies.

Yes, attorneys and estate planners cost money. But something tells me it will be a pittance compared with what the Rolison brothers have paid in legal fees over the last decade. And they’re not done yet.