Life insurance policies and retirement plans are key components of most estate plans today. In many cases, they represent the majority of assets in an estate. If the beneficiary designations are not kept up-to-date or not made at all, then these key assets may go to someone unintended.

Austin Hardy's employer managed his retirement plan, as is the case for millions of Americans. Hardy either neglected to or forgot to designate a death beneficiary for the plan.

As a result, when he passed away his employer followed the default rules of the plan. Those rules stated that if no surviving spouse or partner existed, then the plan should pass to a surviving child, whether biological or adopted.

Thus, the company transferred the plan contents to Hardy's biological daughter upon his passing.

The problem was that she was not Hardy's legal daughter. She had been adopted by her stepfather. For all legal purposes, she was not Hardy's daughter and he had no legal responsibility for her.

His sisters sued, claiming that the plan assets should have gone to them, not the daughter. The court, however, disagreed with the sisters' position.

In the court's view, the daughter, despite the stepfather's adoption of her, was still Hardy's daughter and thus the plan policy was appropriately followed.

The Wills, Trusts & Estates Prof Blog reported on this case in a recent article titled "Girl Adopted By Stepfather Entitled to Biological Father's Retirement Plan."

This case is obviously a bit unusual. The fact pattern – someone passed away with a retirement plan with no death beneficiary who had a biological daughter who was subsequently adopted by another man – is not one that is likely to repeat on a regular basis. However, there are still lessons to be learned.

Not keeping beneficiary designations up-to-date or neglecting to make them in the first place is all too common in estate planning.

As illustrated by this case, when you fail to designate a beneficiary of your retirement plan you unnecessarily lose control over who the beneficiary is, and that means that it might be someone you would not have wanted to receive the money.

Be sure to review all of your beneficiary designations with your estate planning attorney.

For more information about estate planning, please visit my estate planning website.

Reference: Wills, Trusts & Estates Prof Blog (August 4, 2015) "Girl Adopted By Stepfather Entitled to Biological Father's Retirement Plan."