By Alexis Levitt
Wills and beneficiary designations are similar in that they allow you to name the person(s) who will receive your assets after you pass away. However, they are not the same. Understanding the differences is crucial to ensuring your wishes are carried out.
Let’s begin with two basic definitions. A will is an estate planning document that sets forth your wishes regarding the distribution of your probate estate’s assets after you pass away. Your “probate estate” consists of all of your assets that have only your name on them – no co-owners, no beneficiaries, no trusts. You decide whether to create a will or not, and you draft it with the help of an estate planning attorney.
A beneficiary designation, on the other hand, is a document that names the individual(s) who will receive certain specific assets after you pass away. A beneficiary designation is required by the company that holds an asset on your behalf. Assets that typically pass by beneficiary designation include retirement accounts, life insurance policies, and annuities.
So, why do these distinctions matter? When an individual dies, the instructions in a will only address assets included in their probate estate. Assets with beneficiary designations are excluded from the probate estate by default. To avoid any conflict, and to ensure your wishes regarding “who gets what” are honored, it’s crucial to make sure the language of your will correlates with each of your beneficiary designations.
Consider the following example. You name your spouse as your sole beneficiary in your will. However, years ago, when you set up your retirement account, you named your children as your beneficiaries. Or perhaps you got divorced and remarried, but neglected to update your beneficiary designations and your ex-spouse is still the designated beneficiary for your retirement account. In either case, your retirement account will not go to your current spouse, even though you want them to receive “everything.”
This is why it is so important to make sure your beneficiary designations and your will are in sync and kept up to date.
About the Author: Alexis Levitt practices elder law, special needs planning, estate planning, and veteran’s benefits. She sits on the board of the Massachusetts chapter of the National Academy of Elder Law Attorneys and represents it on the Massachusetts Coalition for Serious Illness Care. Alexis also sat on the board of the Norwell Council on Aging. Her office is in Norwell. You can reach her at 781-740-7269 or visit her website and blog for more information at www.alexislevitt.com.
