A recent story in the Wall Street Journal illustrates one of the most common problems in estate planning. Not bad documents. Not a bad trust. Not family fighting over intent.
It’s implementation.
Ed Lyon was a urologist at the University of Chicago. He and his wife, Val, had 12 children and 36 grandchildren. In 2014, they updated their estate plan. Their trust was designed so Ed’s retirement account would ultimately benefit 36 separate trusts for the grandchildren.
That was not just sentimental planning. It was tax planning. Ed died in 2019, before the SECURE Act changed the rules for many inherited retirement accounts. At that time, many beneficiaries could still stretch distributions over life expectancy, allowing decades of tax-deferred growth.
But the beneficiary update did not stick.
Seven years later, the family is still fighting. The account was worth about $1.2 million at Ed’s death. According to the article, it is now worth about $1.7 million and remains in limbo.
What Went Wrong
Two issues collided.
First? The beneficiary form.
The estate planning attorney reportedly gave the family instructions to update the beneficiary form. In 2019, Ed was ailing and Val was incapacitated. Dan Davies, acting as financial agent, went online to confirm the beneficiary information and saw something listed as “on file.”
When he called, he was told the update was not actually on file. He completed a new form. TIAA later said it could not process the form because it was not properly signed.
Second? The spousal waiver.
Because Val was incapacitated, her financial agent signed a waiver of her spousal rights on her behalf. The power of attorney reportedly gave him authority over retirement accounts and authority to designate beneficiaries.
That sounds like enough. But it wasn’t.
TIAA and the university took the position that the power of attorney was not explicit enough to authorize a waiver of Val’s spousal rights in Ed’s 403(b) account. A lower court agreed, and the family appealed.
That is the part clients need to understand. A power of attorney that works for ordinary financial matters may still fail for specific retirement-plan actions, especially when spousal rights are involved.
Why This Matters
Your will does not control your 401(k), 403(b), IRA, life insurance policy, annuity, payable-on-death account, or transfer-on-death account.
Your trust does not control those assets either unless the trust is properly named as beneficiary and the custodian or plan administrator accepts the designation.
The beneficiary form is its own legal act. It has to be completed correctly. It has to be accepted. It has to be current. And with workplace retirement accounts, spousal rights can matter in ways that a general power of attorney may not cover.
The Lyon case also had unusually high tax stakes because Ed died before 2020. Today, for many non-spouse beneficiaries, the old lifetime stretch is gone. The current default is often the 10-year rule: the inherited retirement account generally must be emptied within 10 years, unless the beneficiary qualifies for special treatment.
So this was not just a fight over who gets the money. It was a fight over tax treatment, timing, and years of tax-deferred growth.
Signing the Trust is Step One. Coordination is Step Two.
A proper estate plan should answer four questions:
- What do the documents say?
- What owns the assets?
- What do the beneficiary forms say?
- Can the plan actually be administered after incapacity or death?
This is where estate plans often fail. Not in the trust. Not in the will. In the gap between the documents and the assets.
The Practical Takeaway
When we complete an estate plan, reviewing beneficiary designations is part of the process, not a homework assignment I hand off and forget.
That does not mean every account should name a trust. Tax efficiency, asset protection, disability planning, and family control can all point in different directions. The decision should be intentional.
If you have not reviewed your beneficiary designations recently — or if you have been through a marriage, divorce, or significant family change — that is the starting point.
A good estate plan should not depend on your family proving what you meant. It should leave a paper trail that makes the result clear. Contact us today to speak to a professional.
