When it comes to client benefits, it's forms over function

One lesson of the 2008 financial crisis was that banks didn't do a very good job hanging on to mortgage loan paperwork. One financial adviser thinks that may not be the only papers they misfiled. “With all the bank mergers since 2008, a lot of beneficiary forms won't be found,” said Joseph S. Lucey, president of Secured Retirement Advisors LLC, who deals with the issue frequently. “If you think about it, some of those beneficiary designations may have been made 30 years ago.” Beneficiary designation forms are filled out for retirement accounts, pensions, life insurance and annuity policies, and many account holders never give them another thought, Mr. Lucey said. Financial advisers generally are savvy about reminding clients to double-check their beneficiaries after a major life change, but that may not be enough if the bank loses the paperwork. Mr. Lucey recalls the 2005 case of a Brooklyn man named Bruce Friedman who was denied his deceased wife's $1 million pension because of a lost form. When the late Mrs. Friedman began her career with the New York City school system, she was still single and she designated her sister the beneficiary of her retirement plan. The school system apparently misplaced the form, and for decades, her annual pension reports listed no designated beneficiary, which suited the now-married Mrs. Friedman fine, as her husband would be the default beneficiary under the law. But after her death in 2001, the employer found the 27-year-old form and awarded the pension to the sister, leaving Mr. Friedman without his planned retirement funds. Mr. Lucey said he expects to see this type of problem more frequently in the wake of all the bank mergers of the last few years. For that reason, he asks his clients to make sure they maintain a copy of all beneficiary forms and obtain copies of any they are missing. “Ninety percent of the time, it will go the way you wanted," he said. "But when it doesn't, it is a big problem."