Many
people do not realize that a Last Will and Testament only applies to assets and
property that has not already been spoken for. What that means is that if you
have a bank account, for instance, which names one child as a beneficiary (and
you have 2 other children), that determines who gets the balance in that
account at your passing. The language in the beneficiary designation in a
financial account will override any distribution directions you may have given
in your Last Will and Testament. The same principle applies if accounts are
titled jointly or as tenants by entireties. Ownership of those accounts at your
passing will be determined by who survives you. A specific beneficiary designation
is not necessary.
What
can you do? There is certainly a
convenience factor in using financial institution beneficiary designations and,
as a practical matter, if you have no other assets outside of the financial
institution, a will is not even necessary.
However, that is rarely the case. Thus, the solution is to make sure
that your beneficiary designations with financial institutions match the wishes
you have set forth in your will. An even easier way to solve the potential
problem is to either leave the beneficiary designations blank on bank, etc.,
forms or to designate your estate as the beneficiary of your accounts.
Leaving
your estate as the beneficiary can create problems of its own, however, if your
estate is substantial. You would incur probate fees and potential tax
consequences. Therefore, it is always a good idea to review your wishes with an
attorney who can make sure that your documents are drafted properly and that
your beneficiary designations are consistent with your Last Will and Testament
wishes.
