The Form That Can Override Your Will and Trust

Summary

A seemingly simple beneficiary designation form holds surprising power, capable of overriding even your will, living trust, and sometimes state law. This form dictates the distribution of assets like 401(k)s, IRAs, life insurance, and bank accounts. Two Supreme Court cases, Hillman and Kennedy, illustrate this. In Hillman, federal law and a life insurance beneficiary designation prevented a widow from receiving proceeds over an ex-wife named on the form. Similarly, in Kennedy, divorce paperwork waiving rights to a retirement plan was superseded by the beneficiary designation form, which ERISA required the plan administrator to follow. This highlights that many assets pass by contract, not by will or trust. Key assets to scrutinize include retirement accounts, life insurance, annuities, HSAs, bank accounts with Payable on Death (POD) designations, brokerage accounts with Transfer on Death (TOD) designations, and 529 plans. Failing to update these forms after life events like divorce can lead to unintended distributions. Important action items include creating an inventory of all assets, identifying how each transfers upon death, and logging into accounts or contacting institutions to verify and update beneficiary designations, including primary and contingent beneficiaries. Coordinating these forms with your overall estate plan is crucial for a clean transfer with minimal tax, court involvement, and conflict.