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Read moreDo We Follow the Will or the Beneficiary Designations?
- May 31st, 2024
Q
I have a brother and half-brother who are both beneficiaries of my parents’ estate along with me. My parents’ will stated that certain investment accounts were to be divided into thirds and certain accounts were to be divided in half, depending on how or when they were acquired.
In researching their investments, however, we have found that several of the accounts have been set up as transfer on death (TOD) accounts, and the beneficiary designations do not agree with the statements made in the will. (For example, in some cases, the TOD accounts are divided in thirds instead of halves.) Should the intent of the will be followed or does the TOD account govern the distribution?
A
This is unfortunate and, unfortunately, not that unusual. Parents and others make different distributions in their wills from the beneficiary designations on their accounts, and the heirs have no idea what the deceased person had in mind. Did he or she change her mind from when he or she wrote the will? Did the deceased person forget what they had in mind earlier? Did someone help him or her with the beneficiary designations not having any idea what the will might have said?
This is one reason to use revocable trusts instead of wills and beneficiary designations. They avoid probate just like payable on death accounts, but they don’t create this confusion. Similarly, it isn’t a good idea to designate individual accounts in estate plans since the account balances can change significantly over time.
All of that said, you now find yourself in this regrettable situation. Technically, the beneficiary designations are binding. But if you and your brothers agree, you can follow what your parents said in their wills.
For more information about TODs, read this article.
Last Modified: 05/31/2024