People often think of “estate planning” as just making a Last Will and Testament that directs who should inherit what. But a fundamental and necessary tenet of “estate planning” is to know just what you have, so that you can protect your heirs appropriately. Are any of your accounts jointly owned? Depending on the circumstances, that might defeat the plan in your well-written Will. Did your investment advisor or well-meaning friend persuade you to add a “pay on death” beneficiary to your huge brokerage account? Again, that might defeat the plan in your well-written Will. Do you actually still have that life insurance that you thought you had?
A recent New Jersey case illustrates an unfortunate set of circumstances in which it was thought that the deceased — a teacher — was covered by a group life insurance plan, but it turned out that he wasn’t, because the school he worked at was a charter school which did not complete the paperwork to become a participating employer in the Teachers’ Pension and Annuity Fund and to enroll its employees in the Fund prior to his date of death. In this case, he died just 6 months after beginning employment at that school. But for purposes of careful estate planning, the take-away is that a person may want to purchase private life insurance until they are certain that a sufficient employer policy will replace it.
The case is In the Matter of the Estate of Levinson, (NJ App. Div.), non-precedential (“unpublished”) opinion. The Court affirmed the New Jersey Division of Pensions and Benefits’ denial of the Estate’s application for the non-contributory life insurance benefits, and held that unless the employer had actually completed the process and had become a participant in the coverage agreement, no employee could be enrolled in a state pension plan. In this case, things got even worse because after Levinson’s death, the school’s charter was revoked, and so it could not even apply for retroactive participation in the plan.
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