Will beneficiaries are sometimes surprised to discover that although their deceased loved one had great wealth and although the beneficiaries were properly named in the decedent’s Will, they will receive nothing because of a “HIDDEN WILL.” (And by the way, the same issue applies to revocable trusts.) What is the hidden will? Beneficiary designations and survivorship-type accounts.
Most people remember completing a form when they bought life insurance indicating whom the beneficiary of the life insurance will be when they die. They probably also remember designating a beneficiary when they set up their IRA or when they completed the enrollment forms for benefit savings plans at their employer. And they may recall setting up their bank account with something called survivorship rights or pay-on-death provisions.
But most people have no idea how those designations and ownership forms interact with their Will. Does the Will overrule those forms?
The answer is that the beneficiary designations and ownership forms pass title outside of the Will or outside of probate. So if all of a person’s assets are set up with these designations or forms, there may not be any estate to be probated by presenting the Will to the court. Everything owned by the decedent may have passed directly to a specified beneficiary.
Is that good or bad? It depends. If decedent understood who was receiving his or her property upon their death via these beneficiary designations and forms, then it is fine. However, beneficiaries of a decedent who planned for all of his or her assets to pass in this manner can sometimes be frustrated to find that there are still some assets that did not have such a beneficiary designation or form. Perhaps a refund claim due the decedent came in late or a lawsuit was resolved after death and the judgment amount needs to be probated.
Bottom line is that a Will can serve as assurance that any such assets do pass to the people you want to receive them even if most of your planning is via beneficiary designations or special forms of ownership. If your estate is sizeable, such beneficiary designations and ownership forms may frustrate the detailed tax planning your estate planning attorney prepared for you. That’s why it is critical that you provide your estate planning attorney a complete list of your assets and the form of ownership they are in and any beneficiary designations.
This should be reviewed regularly with your attorney and you should review all beneficiary designations. Don’t assume you remember whom you designated. Ask your insurance or finance company or bank for a copy of whom they have listed as your beneficiaries and your co-owners and what form of ownership is indicated on the account.
If you have any questions, review all of these items with your estate planning attorney. If changes need to be made it is much easier and less expensive to make them while you are alive and competent than to try to make them later.