A common question we are asked by clients when a loved one passes is, “Does the Will or Trust overrides the beneficiary designation on accounts?” In the realm of estate planning, Wills, trusts and beneficiary designations are commonly used tools to ensure the smooth transfer of assets upon an individual’s passing. It is essential to understand how these instruments interact and whether a Will or trust overrides a designated beneficiary on a bank account.
To begin, let’s clarify the roles of Wills, trusts and beneficiary designations.
- A Will is a legal document that states your intentions for distribution of your assets upon your death.
- A trust is a legal entity created to hold and manage assets for the benefit of one or more beneficiaries. It allows the grantor, the person creating the trust, to specify how the assets should be distributed and managed during their lifetime and after their passing.
- A beneficiary designation is the person or entity who will receive the assets held in certain accounts, such as bank accounts, retirement accounts, or life insurance policies, upon the account owner’s death.
The designation of a beneficiary on a bank account generally takes precedence over the instructions outlined in a Will or trust. When a bank account has a designated beneficiary, the account assets will be transferred directly to the named beneficiary upon the account owner’s death, without going through the probate process. This is known as a “payable on death” or “POD” account.
The advantage of a POD account is its simplicity and efficiency in transferring assets directly to the beneficiary, bypassing probate. It is worth noting that the beneficiary designation on a POD account supersedes any conflicting instructions in a Will or trust. Therefore, if a Will or trust specifies different beneficiaries or distribution instructions for the same account, the beneficiary designation will prevail.
It’s important to emphasize that proper estate planning and coordination between Wills, trusts and beneficiary designations are crucial to ensure that assets are distributed according to the account owner’s wishes. It is advisable to consult with an experienced estate planning attorney who can provide guidance on creating or updating Wills, trusts, designating beneficiaries, and navigating the legal intricacies to ensure your estate plan aligns with your intentions.
At Grissom Law, LLC, we work with individuals and couples to create a comprehensive plan that aligns with your wishes. Call us at 678.781.9230 to schedule an appointment to meet with us to begin your estate planning.
Disclaimer
This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney client relationship between you and Grissom Law, LLC.
FAQs
A beneficiary designation generally overrides a trust in the same way it overrides a will.
What can override a beneficiary? ›
This means that if a beneficiary disagrees with the distribution in the will, any other will terms, or the executor's duties under the law the executor can — and must — disregard the beneficiary's wishes and carry out the will's requirements and follow the law.
Can a trustee ignore a beneficiary? ›
A trustee cannot refuse to give a beneficiary money under just any circ*mstances—if they do not have authority or a reason to do so, it could be grounds for a legal contest.
Who holds the real power in a trust, the trustee or the beneficiary? ›
After the Trust is written and established, the Trustee holds the power to administer the Trust as it is written. The Trustee has to follow the rules written within the Trust. Some Trusts can be revoked or changed after they've been established. Others cannot and will stand forever after they've been executed.
Who has the right to change the beneficiary designation? ›
In most cases, you may change the beneficiaries named on a life insurance policy or other financial account at any time. Changing beneficiaries is usually easy to do — the challenge is often in remembering to do it. Contact your employer, financial professional or financial services company to learn how.
What would be the disadvantage of naming a trust as a beneficiary? ›
Naming a trust as a beneficiary is a good idea if beneficiaries are minors, have a disability, or can't be trusted with a large sum of money. The major disadvantage of naming a trust as a beneficiary is required minimum distribution payouts.
Can an executor cheat a beneficiary? ›
Executors are bound to the terms of the will, which means they are not permitted to change beneficiaries. The beneficiaries who were named by the decedent will remain beneficiaries so long as the portions of the will in which they appear are not invalidated through a successful will contest.
Does marriage override beneficiary designation? ›
In most cases, a spouse cannot directly override a beneficiary designation on a bank account. The designated beneficiary will receive the funds regardless of the spouse's wishes unless the account holder changes the beneficiary designation before their death.
Can next of kin override beneficiary? ›
Next of kin typically doesn't override a valid will. However, if someone successfully contests your will in court, your state's intestacy laws may look to your next of kin to handle and potentially inherit your estate.
Can a trustee abuse a beneficiary? ›
Beneficiary abuse is not acceptable in California's trust and will cases. Being appointed as a trustee or executor of a will is a big responsibility.
A trustee cannot act outside the authority granted to them by the trust. They must manage assets and investments according to its terms and not engage in activities not authorized by it.
How much power does a trustee have over a trust? ›
A trustee is a person or entity responsible for and with the authority for managing and administering your trust according to your instructions and in accordance with state law. They are considered a fiduciary (meaning they are held to a higher standard of care and owe certain duties to the beneficiaries).
Can a trustee withhold money from a beneficiary? ›
In certain circ*mstances, a trustee may have valid reasons to withhold funds from a beneficiary. However, it's important to note that trustees cannot arbitrarily withhold funds without proper justification. Trustees must abide by the terms of the trust and act per applicable trust laws.
How do you hold a trustee accountable? ›
The Options for you to Hold the Trustee Accountable
- Contact the Trustee. ...
- Write a Letter. ...
- Hire an inexpensive lawyer. ...
- Hire an expensive lawyer. ...
- Hire an attorney who can take court action.
Trustees may face civil and even criminal penalties depending on the severity of the breach. Civil penalties can include financial restitution to the beneficiaries, while criminal penalties might arise if the trustee's actions involve fraud, embezzlement, or other illegal activities.
Why use a trust instead of a beneficiary? ›
Trusts can provide many valuable benefits to wealthy younger families including: Providing for family members if something should happen to you. Dictating the distribution of your assets to specific beneficiaries. Helping transfer highly-appreciated assets tax efficiently.
Can a beneficiary take control of the trust? ›
Beneficiaries of trust generally fall into two categories. One type of beneficiary is ultimately entitled to take ownership and control of trust capital and the income it generates as outlined in the trust agreement.
Is a trust an eligible designated beneficiary? ›
Understanding Eligible Designated Beneficiary (EDB)
An eligible designated beneficiary (EDB) is always an individual. An EDB cannot be a nonperson entity such as a trust, an estate, or a charity, considered not designated beneficiaries. Five categories of EDBs include: Surviving spouse.
What is the difference between in trust for and pod? ›
ITF stands for in trust for, which is an arrangement in which a grantor establishes a trust to hold assets on behalf of one or more beneficiaries. POD stands for payable on death, which means that assets in a financial account are payable to one or more named beneficiaries when the account owner passes away.
