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What Happens When Your Will and Your Beneficiary Designations Don’t Match?

By Amanda Dorio, Esq. What actually passes outside your will? beneficiary provisions of the actual account, policy
More than you would guess. Life insurance or plan matter.
ou created a will. Maybe you created a trust policies, IRAs, 401(k)s and other retirement
too. You did the work, so you assume those accounts, annuities, bank or investment accounts set Can you just change a beneficiary
Ydocuments define who gets what when up as pay-on-death or transfer-on-death, and jointly through your will?
you’re gone, but there’s a catch. In Florida, your will owned property, depending on how it’s titled. Generally, you should not rely on a will to change
or trust do not automatically control the ultimate The takeaway: a coordinated estate plan requires a beneficiary designation. Financial institutions,
distribution of all of your assets. looking beyond the will. Beneficiary designations insurers and retirement plans typically have
Think about it this way: What if your IRA names and account ownership can have a significant procedures for naming and changing beneficiaries.
one child as the beneficiary, but your will splits impact on who ultimately receives your assets. Federal guidance for retirement plans, for example,
everything evenly among your kids? What if your directs participants seeking to change beneficiaries
What if your trust names different beneficiaries?
life insurance policy still lists an ex, or someone you to follow the applicable plan’s procedures.
haven’t thought about in years? What if you updated Same problem, different document. Setting up If you want to change who receives a beneficiary-
your trust last year but never went back and checked or updating a trust does not automatically change designated asset, review and update the appropriate
the beneficiary form on your brokerage account? beneficiary designations on your other accounts beneficiary documentation rather than assuming that
These aren’t hypotheticals. They happen more either. changing your will accomplishes the same result.
often than you would think, and the gap between Your trust controls only the assets that have
“what my will or trust says” and “what actually actually been transferred into it. You can name a When should you review
happens” can catch families completely off guard. trust as a beneficiary on a retirement account, but your beneficiary designations?
tread carefully because the IRS has specific rules A beneficiary review makes sense whenever
Does a will override a beneficiary designation about how inherited retirement assets are taxed and you create or update an estate plan. It can also be
in Florida? distributed, and those rules treat trusts differently important after major life events such as marriage,
Generally, changing your will does not, by itself, depending on how they are set up. This is another divorce, remarriage, the death of a spouse or
change a valid beneficiary designation on a separate reason beneficiary designations should be reviewed beneficiary, the birth or adoption of a child or a
account, policy or plan. A will governs the disposition as part of the overall estate plan. significant change in financial circumstances. The
of property that passes through the probate estate. The bottom line is that it’s imperative that review should consider the estate plan as a whole:
Other assets may pass outside probate according you coordinate your trust with your beneficiary Who is named in the will?
to a beneficiary designation or another form of designations now, not after the fact. What property is held in the trust?
ownership. Who is named on retirement accounts and life
What happens after a divorce?
For example, an IRA, retirement plan or life insurance?
insurance policy may allow the owner to name Divorce presents another important beneficiary- How are significant bank, investment and real
the person or entity that will receive the asset or designation issue. Florida law provides that certain estate assets titled?
proceeds at death. Florida also recognizes payable- beneficiary designations in favor of a former Looking at those pieces together can reveal
on-death accounts, under which funds become spouse become void when the marriage is judicially inconsistencies while there is still time to address
payable to a named beneficiary after the account dissolved or declared invalid, subject to statutory them.
holder’s death. exceptions. Florida Statute § 732.703. But people
The rules can vary depending on the type of asset. should not assume that divorce automatically Bottom line
That is why changing a will should not be viewed as resolves every beneficiary issue. You can have a beautifully drafted will or
automatically changing every instruction governing The Florida statute contains exceptions, and trust and still end up with an unexpected result
what happens to your property at death. different rules may apply to assets governed by if beneficiary designations and ownership
federal law. Retirement benefits are a particularly arrangements tell a different story.
A common estate planning scenario important example because federal requirements can Retirement accounts, life insurance policies, and
Picture a Florida father with three adult children. affect spousal rights and beneficiary designations. other assets may pass outside probate according
His will directs that all of his assets be divided After a divorce, reviewing beneficiary forms to their governing documents and applicable law.
equally among them. Simple enough. along with the will, trust, and other estate planning Updating a will or trust does not necessarily update
But years earlier, when he first opened a brokerage documents can help identify instructions that no those separate instructions.
account, he filled out a pay-on-death designation longer reflect the owner’s wishes. Reviewing how assets are titled, who is named
form naming his oldest daughter as the sole as beneficiary and how those arrangements interact
What if you never named a beneficiary?
beneficiary. Maybe she helped him set it up, maybe with your estate planning documents can help
it just made sense at the time. He forgets all about it. It depends on the asset. An account, insurance identify potential conflicts and better align the
He updates his will later on, but that pay-on-death policy or retirement plan may contain provisions overall plan with your intentions.
designation form never gets touched. specifying what happens when there is no effective If you have updated your will or trust but have
He passes away. The brokerage account is now beneficiary designation or when the named not reviewed your beneficiary designations recently,
worth $750,000. Here’s the problem: the will’s beneficiary dies before the owner. this is a good time to make sure the pieces of
direction to divide his assets equally among his Depending on the governing documents and your estate plan still work together. For assistance
children does not include the brokerage account applicable law, the asset may pass to another reviewing your Florida estate plan and beneficiary
because that account had its own beneficiary beneficiary or ultimately become payable to the designations, I may be reached at amanda.dorio@
designation. owner’s estate. If an asset becomes part of the henlaw.com.
The result may be very different from what his probate estate, its disposition may then be governed
children expected, and potentially different from by the owner’s will. If the person dies without a Amanda Dorio is Co-Chair of Henderson Franklin’s
what their father intended when he later updated his valid will, Florida’s intestacy laws may determine Trust & Estate Planning practice based in the firm’s
will. who receives the probate property. This is why the Naples office: amanda.dorio@henlaw.com

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