Don’t think that your will and/or living trust will necessarily determine who receives your assets after you are gone. Generally speaking, changing beneficiaries in your will and/or living trust does not override the beneficiaries you have listed on beneficiary designation forms for your retirement, annuity, transfer on death brokerage accounts, pay on death bank accounts, and life insurance policies. Wills and living trusts don’t always dictate how assets will be distributed. Many assets pass according to beneficiary designation and override the terms of a will and/or living trust. However, spouses may have special rights under state and federal law.
For example, John purchased a life insurance policy 15 years ago through XYZ company. At the time, John was single and did not have children. As a result, he listed his brother Ben as the primary beneficiary on the XYZ company designation of beneficiary form. Five years ago, John got married and had two children. Shortly after his marriage, John and his wife created wills and a living trust that left everything to one another and then to their two children. However, John never thought he needed to change the beneficiary designation on the XYZ life insurance policy. John passed away last year and the entire life insurance proceeds on the XYZ policy were given to his brother Ben, and his wife and children did not receive any portion of the life insurance proceeds.
The above type of scenario is not uncommon and results in unintended consequences. The good news is that ensuring that the right people inherit your assets after you are gone is easy to do if you know what to do. It is very important to periodically review (approximately every three years or sooner) and update change of beneficiary forms for all of your assets and policies. Make sure that the beneficiary designation forms are correct and reflect your current wishes. Your beneficiary designations must be coordinated with your living trust and/or will to ensure that your wishes are carried out. It is important to seek out the assistance of a qualified estate-planning attorney to assist you in coordinating your estate plan with your beneficiary designations.
For more information, please contact the Law Offices of Lisa S. Golshani at 661-362-0770.