Estate planning is more than just writing a Will. Some of people's most valuable assets—retirement accounts, life insurance policies, and certain bank accounts—do not pass through a Will at all. Instead, these assets are controlled by beneficiary designations on file financial institutions.
This distinction is critical. If the provisions in a Will conflict with what is listed on a beneficiary form, the beneficiary designation takes precedence. Understanding how these two tools work together helps prevent unintended outcomes, legal disputes, and family confusion.
Beneficiary designations are instructions you provide directly to financial institutions indicating who should receive specific assets upon your death. These forms are typically used for:
When you pass away, the institution distributes the asset to the named beneficiary—no probate of your Will through the court required. Because these transfers occur outside of the Will, courts and Executors are not involved except, potentially, to pay inheritance tax on those automatically-transferred assets.
This is why it is crucial to keep these designations updated. For example, an outdated form listing an ex-spouse can result in that person receiving your retirement account even if your Will says otherwise.
If your Will names your son as your heir, but your IRA beneficiary form lists your daughter, the financial institution must follow the form, not the Will. The same applies if your Will states that all assets should be divided equally among your children, but a retirement account names only one of them.
These inconsistencies can create confusion, especially if family members interpret the Will as the “final word.” Unfortunately, courts always side with the financial institution’s records when a valid beneficiary form is in place.
That is why periodic reviews of beneficiary designations are essential, especially after significant life events such as marriage, divorce, birth of a child, or death of a loved one.
Assets not subject to beneficiary designations typically pass through probate and are governed by the terms of the Will. These may include:
In these cases, the Executor follows the Will’s instructions, and the assets are distributed through probate. For this reason, a Will is a vital part of every estate plan—but it is only one piece of the puzzle.
Your beneficiary designations, Will, and trust documents should work together to avoid conflicts. An estate planning attorney can help review each component, confirm that assets are appropriately titled, and ensure your wishes are carried out consistently across all accounts and documents.
If you intend for a trust to receive retirement funds or life insurance proceeds, you must name the trust as a beneficiary or reference it in your Will. Failing to do so may result in assets going to the wrong person or being subject to unnecessary taxes.
Estate planning is not a one-time event. Regular updates ensure that your legal documents reflect your current wishes, relationships, and financial circumstances.
Reference: Forbes (June 2, 2015) “Your Will And Trusts Aren’t Enough: Using Beneficiary Designations As An Estate Plan”
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