skip to main content

Protecting Your Assets: How Some Documents Can Override Your Will

Man signing a typed document

Navigating the complex landscape of estate planning can often feel like a jigsaw puzzle, especially when it comes to ensuring that all your documents reflect your current wishes. 

A poignant example of this was highlighted in a recent Wall Street Journal article, where a man’s life insurance benefits unexpectedly ended up with his ex-wife, even though his will clearly stated his children should be the beneficiaries. Why? Because the insurance company rejected the change to his beneficiary forms since it was unsigned.

This unfortunate incident, which resulted in a 6-year legal battle after his death, serves as a stark reminder of the importance of not only having an estate plan in place but continually updating other documents to mirror it.

The documents you should pay close attention to are beneficiary forms for life insurance, retirement accounts, and bank accounts.

Life Insurance Beneficiaries

Life insurance acts as a safety net for your loved ones, but it can be more complex than it seems at first glance. The rules around beneficiaries can vary depending on whether your policy is an employer plan or one you’ve purchased independently.

Workplace Plans

If you have a policy through your workplace, it’s essential to dig into your employer-plan documents. These often contain critical details about who the default beneficiaries are and how you can change them. Don’t assume that naming someone in your will is enough – as our earlier example showed, beneficiary forms can override a will.

Individual Plans

On the other hand, if you’ve bought a policy on your own, your insurance company’s rules will guide you. Each company has its own procedures for designating and changing beneficiaries. Understanding these rules is crucial to ensure your benefits go to the intended person or people.

In both scenarios, it’s important to stay on top of your beneficiary designations and make necessary updates as your life changes. 

Retirement Accounts

Retirement accounts also have unique rules when it comes to designating beneficiaries.

For 401(k) accounts, if you are legally married, your spouse is automatically considered to be the beneficiary, regardless of whom you’ve listed. So, even if you’ve named another family member, a friend, or a trust as your beneficiary, your 401(k) benefits will go to your spouse unless they have signed a notarized waiver relinquishing their rights to these funds.

On the other hand, Individual Retirement Accounts (IRAs) typically provide more flexibility. In most states, you can name anyone as your IRA beneficiary without needing a spousal waiver.

Bank & Brokerage Accounts

Similarly, bank and brokerage accounts have their own set of rules around beneficiary designations. 

When you open a bank or brokerage account, you can designate a ‘payable-on-death’ (POD) beneficiary. This individual would inherit the assets in the account directly upon your death, bypassing the often lengthy and complex probate process.

However, it’s essential to remember that, like life insurance policies and retirement accounts, the named beneficiaries on these accounts might take precedence over instructions in your will. So, even if your will states otherwise, the assets in these accounts may be distributed to the named POD.

Consult an Estate Planning Attorney

Ensuring that your assets will be distributed according to your wishes means staying on top of all these details – reviewing beneficiary designations, understanding the implications of spousal rights, and aligning your financial plan with your broader estate plan. 

Consulting with an estate planning attorney can offer you invaluable guidance and a much-needed sense of peace and security. Estate planning can be a complex, sometimes overwhelming journey, and it’s important to remember that you don’t have to navigate it alone. 

Reach out to me so we can discuss your needs and concerns. Whether at the beginning of your estate planning journey or looking to update an existing plan, McMillan Metro Faerber is here for you. I and the attorneys in my group will be happy to guide you through this process and ensure your legacy is protected. After all, your peace of mind is always our ultimate goal.