Are Your Beneficiary Designations Up to Date?

Non-probate assets are those assets which do not go into an estate when the owner dies. Updating estate plans and reviewing beneficiary designations are both important estate planning tasks, more important than most people think. They’re easy to fix while you are alive, but the problems created by ignoring these tasks occur after you have passed, when they can’t be easily fixed or can’t be fixed at all.

Case Study: A Family Dispute

A father of three children created an estate plan when his children were in their twenties. His Last Will and Testament directed all assets in a substantial brokerage account to be equally divided between the three children. However, his will was never updated over the following thirty years.

During that time, his two sons became successful, affluent physicians with high incomes. His daughter, a retired educator who had raised two children as a single mother, struggled financially for many years.

When the father met with his investment advisor, he signed a beneficiary designation leaving the substantial brokerage account to his daughter. Upon his death, his two sons claimed that the Last Will – which directed equal division among all three children – should govern the distribution.

Non-Probate Assets and Beneficiary Designations

Assets held in accounts with beneficiary designations are considered non-probate assets. They do not pass through probate and their disposition is not controlled by the Last Will. The contract between the financial institution and the individual is paramount.

Insurance policies, retirement accounts, bank and brokerage accounts typically have these designations. They often include pay-on-death provisions, and the beneficiary is clearly named.

If an account owner fails to sign a right of survivorship, pay-on-death provision, or name a beneficiary before death, the assets pass to the probate estate. This complicates what could otherwise be a simple transaction.

Legal Outcome

The two sons were correctly advised by an estate planning attorney that their sister had full and protected rights to the investment account, despite their wishes. When provisions in a Last Will conflict with a contract between an owner and a financial institution, the contract prevails.

In this case, the less financially secure daughter and her family benefited from her father’s foresight.

Key Takeaway

Last Wills and beneficiary designations need to be reviewed and revised to ensure they reflect your wishes as circumstances change over time.

If you or a loved one needs assistance with estate planning issues, do not hesitate to contact The Stegall Law Firm for guidance.