What Is The Most Important Financial Advice You Can Give Me?

Don’t let you or your loved ones end up like Bruce Friedman.

Dear readers, I know that you’ve never heard of Bruce Friedman, but I hope that you never forget him. I urge you to spend a few moments learning from the sad story of an unhappy man.

Bruce and Anne Friedman were happily married for 20 years.  Anne was a school principal in New York City. While on vacation, she died suddenly of a massive heart attack. Anne had always assured Bruce that he was the beneficiary of her state teacher’s retirement fund, and as her surviving spouse, he filed a claim for the $950,000 in benefits. To Bruce’s considerable shock, his claim was denied. The state retirement fund informed Bruce that when Anne became a participant in the fund 28 years earlier, she  had named her parents and her sister as her beneficiaries. As both  her parents were deceased, the state awarded Anne’s entire retirement benefit to her sister. Her husband Bruce received nothing. Bruce took the matter to court, claiming that as surviving spouse, he was entitled to the retirement benefit that Anne had promised him during the years of their marriage. He lost in court. He appealed and lost. He appealed again and lost again. The New York Supreme Court decision pointed out that since Anne had never changed her original beneficiary designation, she obviously did not wish to make her husband the beneficiary of her retirement fund.  We can pity poor Bruce Friedman, whose hopes for a financially comfortable retirement were shattered. Incidentally, Anne’s sister received ALL the retirement benefit, and refused to share it with Bruce.

Dear readers, it’s easy to see what caused this financial catastrophe for Bruce. Apparently, Anne simply never got around to changing her beneficiary designation form when she and Bruce married. And apparently she assumed that she had made the change,  but she had not!  The results were surely not what she had intended, and her husband Bruce was the big time loser.

Basically,  in Tennessee there are three ways that property ways by which property passes at death: (1.) by wills and trust agreements; (2). by joint ownership (real estate, bank accounts, brokerage accounts, etc.); and (3.) by beneficiary designations (life insurance contracts, annuity contracts, payable on death accounts, pension and profit sharing plans, Individual Retirement Accounts (IRAs), Keogh plans, 401(k) and 403(b) plans, and other types of retirement accounts). 

As a financial advisor, I routinely see new clients whose beneficiary designations name a former spouse, a deceased relative, etc.  They simply forgot to change those important documents when their circumstances changed.  While people may change their wills, they often forget that a significant part of their assets passes to their heirs by beneficiary designations rather than by will.

What should you do to avoid a tragic situation like Bruce suffered?  Promptly review ALL financial documents that have beneficiary designations. Typically this will include life insurance, annuities, retirement accounts, etc.  Your CPA, attorney or financial advisor can assist you. Be sure that you retain copies or duplicate originals of all beneficiary designations. Your or your loved one’s financial future may depend on an up-to-date and correct  beneficiary designation form. Remember poor Bruce Friedman!