The Battle For Beneficiary: Will Vs. Investments

When it comes to estate planning, it's important to understand the difference between a will and a beneficiary designation. A will is a legal document that outlines your wishes for the distribution of your assets after your death, while a beneficiary designation allows you to name specific individuals who will receive certain assets, such as life insurance policies, retirement accounts, or bank accounts. The key distinction is that a beneficiary designation usually supersedes a will. This means that if there is a conflict between the two, the beneficiary designation will take precedence, and the asset will be distributed according to the designated beneficiary. Therefore, it is crucial to carefully review and update your beneficiary designations and will to ensure they align with your wishes and avoid any confusion or litigation among your beneficiaries.

Beneficiary designations supersede wills and trusts

When it comes to planning your estate, it is important to understand the difference between a beneficiary designation and a will. While both provide instructions for the distribution of assets, they serve different purposes. A will is an estate planning document that describes your wishes for the distribution of all assets included in your estate. On the other hand, a beneficiary designation is a document required by the company holding a specific asset, such as a life insurance policy, retirement account, or bank account. This document names the individual who will receive that particular asset upon your death.

In most cases, a beneficiary designation supersedes a will. This means that if there is a conflict between the two, the beneficiary designation will take precedence. For example, if you wrote in your will that you want everything to go to your spouse, but you designated your children as beneficiaries of your retirement savings account, the designation would supersede the will. As a result, the money in the retirement account would be transferred to your children, not your spouse. Therefore, it is critical to ensure that your will and beneficiary designations are consistent and up-to-date to avoid any unintended outcomes or confusion.

It is worth noting that beneficiary designations bypass the probate process, while assets included in a will typically go through probate. This means that beneficiary designations provide a faster and more convenient way to transfer assets to your loved ones, as they involve minimal court involvement. However, it is still important to have a will in place to cover all your bases, especially for assets that do not allow beneficiary designations, such as real estate property, family heirlooms, and sentimental possessions.

To summarise, while beneficiary designations generally supersede wills, it is important to regularly review and update both your will and beneficiary designations to ensure that your wishes are accurately reflected and to avoid any potential conflicts or litigation.

Beneficiary designations can be made for vehicles, bank accounts, and smaller properties

While beneficiary designations are most common for retirement accounts and life insurance policies, they can also be made for vehicles, bank accounts, and smaller properties. This means that if you have a specific person in mind to leave your car, savings, or other assets to, you can make them the beneficiary. This ensures that these assets will be transferred directly to them upon your death.

To name a beneficiary for a bank account, you typically need to fill out a form provided by the bank. Not all banks offer this option, and it is usually not required. However, naming a beneficiary for a bank account can help your funds avoid the probate process, which can be lengthy and costly. Instead, your beneficiary can collect the money immediately by presenting a certified copy of the death certificate, along with their identification, and filling out a few forms.

It is important to note that beneficiary designations usually supersede wills. This means that if there is a conflict between the beneficiary designation and the will, the designation will take precedence. For example, if you leave your motorcycle to your youngest son in your will but your daughter is named as the beneficiary designation, the motorcycle will go to your daughter, regardless of what your will states. Therefore, it is crucial to keep your beneficiary designations updated and ensure they align with the wishes outlined in your will.

In conclusion, beneficiary designations for vehicles, bank accounts, and smaller properties are possible and can provide a straightforward way to transfer assets to your chosen beneficiaries upon your death. However, it is important to carefully consider your options and seek professional advice to ensure your wishes are accurately reflected and carried out.

Beneficiary designations bypass the probate process

When it comes to estate planning, it's crucial to understand the distinction between a beneficiary designation and a will. While both provide instructions for the distribution of assets, they serve different purposes. A will is a comprehensive estate planning document that outlines your wishes for all assets included in your estate, whereas a beneficiary designation is specific to a particular asset, such as a life insurance policy or a retirement account.

Beneficiary designations play a significant role in bypassing the probate process. Probate is a legal procedure for settling an estate according to the will, and it can be lengthy and costly. However, assets with designated beneficiaries, such as life insurance policies or retirement accounts, are excluded from probate and pass directly to the named beneficiary. This immediate transfer occurs regardless of the terms of your will, and the beneficiary can inherit the proceeds without involving the probate court.

The ability of beneficiary designations to supersede wills underscores the importance of careful estate planning. It is essential to periodically review and update your beneficiary designations to ensure they align with your current wishes. Failure to do so could result in accidental inheritance, where assets are distributed according to outdated designations rather than your most recent intentions.

To avoid potential conflicts, it is crucial to maintain consistency between your will and beneficiary designations. Consulting with an experienced estate planning attorney can help ensure that your beneficiary designations are properly integrated into your overall estate plan. Additionally, certain assets, such as vehicles, bank accounts, and smaller properties, may also have beneficiary designations, further highlighting the need for diligent oversight and updates.

In summary, beneficiary designations provide a mechanism to bypass the probate process and facilitate a swift transfer of assets to the designated beneficiaries. However, the complexity of estate planning warrants careful consideration and periodic reviews to ensure your wishes are accurately reflected and executed.

Beneficiary designations are unique to each asset

When it comes to planning your estate, it's important to understand the difference between a beneficiary designation and a will. A beneficiary designation is a document that names the individual who will receive a specific asset in the case of your passing. Beneficiary designations are unique to each asset and are managed by the entity that holds the asset.

For example, if you purchase a life insurance policy, the insurance company will likely send you a beneficiary designation document during your enrolment process. In this document, you specify which individual should benefit from your policy in the event of your death.

On the other hand, a will is an estate planning document that describes your wishes and instructions regarding the distribution of your assets as a whole. It's a legally binding document that should hold up in court, providing it is set up properly.

While both wills and beneficiary designations provide instructions for the distribution of assets, they serve different purposes. A will provides instructions for all of the assets included in your estate, whereas a beneficiary designation is for a specific asset. Additionally, a will is something you set up on your own accord, while a beneficiary designation is a document required by the company holding the asset.

Common assets that pass by beneficiary designation include life insurance policies, retirement accounts, annuities, vehicles, bank accounts, and smaller properties. It's important to note that beneficiary designations can be revocable or irrevocable. If revocable, the owner of the asset can make changes. However, an irrevocable beneficiary has certain guaranteed rights that cannot be denied or amended.

Beneficiary designations can be amended

It is important to keep your beneficiary designations up to date as your life changes. For example, if you get married, divorced, have children, or experience the death of a loved one who is listed as one of your beneficiaries.

Divorce may revoke a spouse's right to receive benefits in some jurisdictions, so you may need to re-designate their relationship status in your will if you wish for them to remain a beneficiary.

If you have life insurance or retirement accounts through your employer, they may keep your beneficiaries on file for all of your employee benefits. If you have investments, retirement accounts, or life insurance through a financial professional, check with them to ensure your beneficiaries are on file.

Most financial services companies provide a form or website for you to designate your beneficiary so they have it on file with your other account or policy information.

If you have transferred ownership of an account or life insurance policy to someone else, you are no longer the owner and therefore cannot change the beneficiary.

In some circumstances, such as the specific terms of a divorce or if you made an "irrevocable designation", you may not be able to change or name a new beneficiary without getting your current beneficiary's consent.

If you wish to divide your life insurance policy among several loved ones, you can amend your beneficiary designation to specify each person and the percentage share they are supposed to receive. Alternatively, if you have one beneficiary but are worried that a large lump sum may be overwhelming for a young person, you can stipulate that the payout will be stretched over a period of up to ten years.

It is important to name secondary or contingent beneficiaries to ensure that if anything happens to the first beneficiary, you can still control how your assets are distributed.

Reviewing and Changing Your Beneficiary Designation(s)

While you are in the process of reviewing and amending your beneficiary designations, it helps to consider what options you have as an account holder of a life insurance policy or retirement account.

You can name your estate as a beneficiary, but this has its drawbacks. The biggest is that it forces the contents of your account to go through the probate process, which can be lengthy and expensive.

You can also name a trust as a beneficiary for your accounts. You can name an irrevocable trust as the owner of a life insurance policy. This will ensure that the payout will still go to the beneficiaries designated in your policy. But because you no longer own it, and because irrevocable trusts are completely divorced from their grantors, the contents of the life insurance policy will no longer count towards your estate's net value.

However, rules are different for retirement benefits. You should not write a retirement account into a trust. Instead, name your trust as a beneficiary and then have your trustee distribute the contents of that trust to your loved ones.

Keeping Beneficiary Designations Updated

It is important to carefully designate and remember to update beneficiaries to ensure your intentions will be carried out as you wish.

An easy way to remember to keep your beneficiaries up to date is to use your employer's annual benefits enrollment to revisit the details of your accounts and insurance policies.

Frequently asked questions