At our death, we want our assets to benefit those who receive them. And we want our beneficiaries to receive them both gratefully and peacefully (without controversy from other potential beneficiary candidates). To avoid one problem that would stand in the way of these goals, make sure the beneficiary structure in your Will (or trust) and the beneficiaries on your financial accounts are the same. If they aren’t the same, then your Will (or trust) should say that you meant for them to be different.
Beneficiary Designations Are Good, But May Backfire.
Beneficiary designations for banking and investment accounts, such as Pay On Death (POD) or Transfer On Death (TOD) designations, have many uses, and they can be a helpful part of an estate plan. Those designations, like the beneficiary designations on your retirement accounts, tell the financial institution who the new owner of the account will be at the moment of your death. An account with a beneficiary designation doesn’t have to pass through your estate and won’t be subject to the probate process. That sounds like a good thing. Right? But the convenience you hoped to create by having beneficiary designations on your investment and banking accounts could instead backfire and cause problems among your beneficiaries, unless certain steps are taken.
Generally, the beneficiaries named in your Will (or trust) are the same beneficiaries you want to share in your accounts. But it’s not necessary that they be the same. The law doesn’t require them to be. Because the beneficiaries are usually the same and because the Will (or trust) is viewed as an expression of how you want your assets to pass, if the Will (or trust) and the beneficiary designations on your accounts are different, your beneficiaries are left to wonder why there is a difference.
The beneficiary who receives less than expected because an account’s beneficiary designation is different from the beneficiary structure of your Will (or trust) often presumes that a mistake was made or that you were unfairly influenced by the person who got more. If the beneficiary structure of your Will (or trust) and the beneficiary designations on the accounts had the same distribution pattern, there wouldn’t be the basis for the presumption. To avoid this problem, you should be careful to make the beneficiary structure in your Will (or trust) and the beneficiary designations on your accounts match. If you want them to be different, that isn’t a problem as long you take steps to make it clear that you knew there was a difference and that you intended it. In other words, if you want to avoid these problems, your Will (or trust) should say that you have intentionally created a different beneficiary structure through the beneficiary designations on your accounts. That will help show that someone didn’t take advantage of you or influence you unfairly to make an inconsistent beneficiary designation.
Working Together To Prevent Problems.
You, your financial advisor, and your estate planning attorney should work together to make sure that what you want to happen with your assets will happen with your assets. When you, your financial advisor, and your estate planning attorney work proactively as a team, you can avoid problems that might otherwise arise. If you have questions or want to be sure your Will (or trust) and the beneficiary designations on your accounts won’t pose a problem for you or your family, contact us. We will work with you and your financial advisor so that your beneficiary structures won’t stir up any unnecessary controversy.