Many people assume their will controls every part of their estate. In reality, some assets pass directly to the person named as the beneficiary. These assets often include life insurance policies, retirement accounts and certain investment accounts. If the beneficiary designation does not match your current wishes, your will may not control who receives those assets.
Understanding how beneficiary designations work can help ensure your assets pass according to your current wishes. They deserve the same attention as your will during every estate plan review.
Beneficiary forms usually control
A beneficiary designation is a legal instruction you complete with the financial institution that holds the account. When you pass away, the institution generally distributes the assets according to that designation. Under New York Estates, Powers and Trusts Law, assets with valid beneficiary designations generally pass outside the probate process.
This means an outdated designation could leave assets to someone you no longer intend to benefit. Because of that, it helps to review these forms after major life events.
Life changes can create unexpected problems
While marriage, the birth of a child, or the death of a beneficiary require manual updates to your beneficiary forms, New York law automatically revokes most revocable beneficiary designations to an ex-spouse upon a final divorce. If the beneficiary designation and the will conflict, the financial institution will often follow the beneficiary designation instead.
For retirement accounts, federal law may also affect who can receive benefits in certain situations. These rules can work alongside state law and influence how assets transfer.
Review your estate plan as a whole
A complete estate plan works best when every document supports the same goals. Your will, trusts and beneficiary designations should reflect your current wishes and work together. Reviewing these documents after significant life changes can help reduce confusion for your family and support a smoother transfer of assets under the New York Surrogate’s Court Procedure Act when probate is required, and help you avoid conflicts and ensure your assets reach the right people.
An effective estate plan changes as your life does. Because beneficiary forms often override your will, it is important to keep all your documents aligned. If you have questions about how these designations interact with your specific estate plan, you may consider reaching out to a legal professional for guidance.