In estate planning, there is no such thing as a “minor” detail. Anything botched or ambiguous can result in a legal mess and lost money for your family. Your will or trust is the core of your estate plan, but all your other arrangements and documents must be crystal-clear, too.
In this post we tell you about the issues that may appear minor, but created big problems for a very big family: the 36 grandchildren of the late Dr. Edward S. Lyon.
The Backstory
A physician and professor at the University of Chicago for many decades, Dr. Lyon had amassed a sizable 403b retirement account. It was valued in excess of a million dollars when he died.
His estate plan, which he overhauled in 2014, set up a trust with 36 sub-trusts, one for each grandchild. Upon his death, the 403b retirement funds were to flow into those trusts.
Also in 2014, his wife Val executed a durable power of attorney that gave authority to manage her financial affairs to her son-in-law, Daniel Davies.
In 2019, Dr. Lyon was in ill health. He died that year, at age 93. Val was incapacitated at the time. Knowing that federal law requires retirement funds to automatically go to the account owner’s surviving spouse unless the spouse specifically waives that right, her son-in-law got in touch with the Teachers Insurance and Annuity Association (TIAA), custodians of the retirement account. Acting as her agent, he completed a form on his mother-in-law’s behalf that waived her rights to Dr. Lyons’s retirement funds. She died the following year at age 89.
Funds Not Released
It has been seven years since Dr. Lyon passed on, but his grandchildren have yet to see a penny from their grandfather’s retirement account. Here’s why: TIAA contends that the original beneficiary paperwork lacked the proper signature. In addition, TIAA says that under Wisconsin law, the power of attorney Val executed did not give Davies the specific authority to waive her spousal rights to the 403b. The couple had resided in Wisconsin following Dr. Lyon’s retirement.
Tax Ramifications
The timing of Dr. Lyon’s death and the timing of receipt of the retirement funds have serious tax implications for the grandchildren. In 2019, federal law permitted a non-spouse who inherited a qualified retirement account to “stretch out” the funds based on the beneficiary’s own lifespan. This allowed the inherited money to grow tax-free over a long period of time. However, the law changed in 2020. Now, non-spouses who inherit retirement accounts must deplete the account within 10 years, eroding those tax benefits.
Lawsuit
Dr. Lyon’s 403b account is now valued at around $2 million. Three of the grandchildren, trustees of the Edward Lyon trust, sued TIAA and the University of Chicago, seeking release of the funds to the Edward S. Lyon trust. The case was decided in December 2025, and TIAA and the university prevailed. The grandchildren plan to appeal. You can see a copy of the court decision here.
If the family loses the appeal, TIAA will release the funds to the estate of Val Lyon. That means the grandchildren may eventually get their share of the funds – if in fact they are the beneficiaries of her estate – but will get them without the tax benefits their grandfather had carefully planned for them to enjoy.
In estate planning, the devil is in the details. Consult with an experienced estate planning lawyer, and always keep your eye on those beneficiary designations and other documents to be sure they coordinate with your plan!
