One frequent question we get is whether certain accounts need to be included in a person’s Will. We are also asked after a loved one passes away if they need to go to court to access these benefits. The answer to both these questions is, “no, IF the account was set up correctly.” But the most important thing to know is this, a contract trumps a will. This means that if your will leaves a life insurance policy to your son, but the policy itself names your daughter as the beneficiary, your daughter will receive the proceeds. The contractual nature of financial accounts has a great effect on most people’s estates. So it is very important that you understand the consequences of your beneficiary designations.
For the purpose of this brief discussion, I will lump all accounts with financial institutions together, including life insurance policies, retirement accounts including 401k and IRAs, annuities, and bank accounts. There are differences in how these accounts need to be handled. This is most true for large or complex estates. However all of these financial accounts allow for the naming of a beneficiary to receive the remaining assets in the account at the passing of the owner of the account or the insured. So for this reason, all are addressed as “financial accounts” in this article.
So how do you make sure that these accounts are in order today in case you were to pass? You need to contact each financial institution. Each institution and account will have a form to fill out designating your beneficiary or beneficiaries. These are usually called Beneficiary Designations with life insurance and most retirement accounts. They are called Right of Survivorship or Payable on Death Beneficiary with some bank accounts. If you have questions about the beneficiary forms, ask the financial institution or
With most accounts, you are allowed to designate multiple people as beneficiaries to share the assets on your passing. You are also allowed to name a trust, charity or your estate as the beneficiary. You should meet with an estate planning attorney in person before naming an entity as opposed to people as your beneficiaries.
If you have named individuals as the beneficiary of your financial account, they should only have to present a death certificate upon your passing in order to receive the assets. It is that simple IF you have planned ahead and filled out all your beneficiary designation forms correctly.