Does a Will Override a Beneficiary Designation?

Someone updates a will to leave everything to their children. They may feel that the estate plan is now complete. But an old life insurance or retirement beneficiary form may still name somebody else.

Which document controls? The answer starts with the particular asset and the rules governing it.

What does the beneficiary designation do?

A beneficiary designation identifies the person or entity that should receive an asset under an account, policy, or plan after death. When a valid designation controls the transfer, that property generally does not pass under the will.

The will can still be important for other property. The problem is assuming that its instructions automatically replace the separate directions attached to every asset.

Why do the account’s rules matter?

Different arrangements can have different requirements for changing a beneficiary. Applicable law, spousal rights, court orders, and the terms of the plan or policy can affect the result.

The Supreme Court’s decision in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. 285 (2009), illustrates the importance of plan documents. The administrator properly paid the beneficiary still designated under the ERISA plan despite a divorce-decree waiver. The case was not a ruling that every kind of beneficiary dispute has the same answer.

As discussed in the earlier Kennedy article, the Court also left a potential claim against the recipient after payment unresolved. Identifying the proper payee and determining whether someone else has a recovery claim can be different issues.

What if no beneficiary is available?

The answer depends on the arrangement. There may be a contingent beneficiary or default-payment provisions. Some benefits may become payable to the estate, but that should be confirmed from the governing documents rather than assumed.

This is one reason to review more than the name in the primary-beneficiary box. Check the backup designation, the percentages, and the instructions that apply if a named person dies first.

What is a useful way to review the plan?

Place the will, account ownership information, and current beneficiary records side by side. For each significant asset, ask who would receive it and which document or legal rule supplies that answer.

Updating a will may be necessary, but it is only part of coordinating the plan. Confirming that each institution has accepted the intended designation can prevent a family from discovering a mismatch after it is too late to ask the owner what they meant.

Tyler ThompsonAuthor