What happens if your will conflicts with your beneficiary designations? Conflicts between wills and beneficiary designations can create confusion in estate planning. For example, your will leaves a bank account to your son, but the account’s payable-on-death (POD) designation names your daughter. Which takes precedence? This article clarifies these scenarios under California law.
At Vistas Law Group, with over 20 years of trust and estate litigation experience, we help ensure your wishes are honored. Let’s explore how wills and beneficiary designations work together.
What Are Beneficiary Designations?
Beneficiary designations are instructions tied directly to specific financial accounts or assets. These designations are commonly associated with:
- Life insurance policies
- 401(k) and IRA accounts
- Bank accounts with payable-on-death (POD) designations
- Investment accounts with transfer-on-death (TOD) designations
The unique feature of beneficiary designations is that they bypass probate entirely. When the account holder passes away, these assets transfer directly to the named beneficiary. This happens because the designation is part of a contractual agreement between the account holder and the financial institution. As long as the designation is valid, it’s legally binding.
Common Misunderstanding
Many people assume that a will can override a beneficiary designation, but this is not the case. If your retirement account lists your ex-spouse as the beneficiary, and your will leaves the account to your children, the ex-spouse will still inherit unless the designation is updated. That’s why it’s critical to keep these documents current.
What Role Does a Will Play?
A will serves as a blueprint for how your assets should be distributed after you pass. It covers property not governed by beneficiary designations, joint ownership, or other contractual arrangements. Here’s what a will can do:
- Direct the distribution of personal property, like jewelry or vehicles
- Name guardians for minor children
- Outline how real estate should be handled (unless jointly owned with the right of survivorship)
However, when assets like life insurance or retirement accounts have named beneficiaries, those designations usually take precedence over the will. Assets addressed in the will must go through probate, which can be a time-consuming process involving court oversight.
When a Will and Beneficiary Designation Clash?
Under California law, beneficiary designations almost always supersede a will. This means the assets tied to those designations go to the named beneficiary, no matter what your will says. Why? Because the beneficiary designation is a direct agreement between you and the financial institution.
Why California Prioritizes Beneficiary Designations?
The rationale is straightforward: it minimizes delays and ensures that assets are distributed as efficiently as possible. Probate can take months or even years, but a properly designated beneficiary can access funds quickly—often within weeks.
Exceptions and Special Situations
Although beneficiary designations usually prevail, there are exceptions to this rule. Here are a few scenarios to consider:
Invalid Designations
A beneficiary designation can become invalid if:
- The named beneficiary predeceases the account holder.
- The designation is unclear or improperly executed.
In such cases, the asset may revert to the estate and be distributed according to the will.
California Probate Code Section 6320
California law underscores the importance of honoring beneficiary designations, but it also provides specific guidance on how such assets should be handled in exceptional circumstances. For example, if fraud or coercion is suspected, a court may intervene.
Joint Ownership with Right of Survivorship
Assets held jointly with the right of survivorship automatically pass to the surviving owner, regardless of what the will or beneficiary designation says.
Why Keeping Beneficiary Designations Updated Is Critical?
Your life changes, and so should your estate plan. Major milestones like marriage, divorce, or the birth of a child can shift your priorities. Please update your beneficiary designations to avoid unintended consequences, such as an ex-spouse receiving your assets or an uneven distribution among your children.
Keeping your designations updated can help prevent potential conflicts among heirs. This will help in distributing your assets according to your current intentions. Also, remember to review your beneficiary designations regularly, not just after major life events.
How does Comprehensive Estate Planning Help?
A well-rounded estate plan accounts for all your assets and ensures everything works together seamlessly. This includes:
- Regularly reviewing and updating beneficiary designations.
- Aligning wills, trusts, and other documents to prevent conflicts.
- Consulting professionals to anticipate potential pitfalls.
At Vistas Law Group, we focus on the big picture to create estate plans that reflect your wishes and stand up to legal scrutiny. Our extensive experience allows us to foresee and address complications that others might miss.
Let’s Make Sure Your Wishes Are Honored
Estate planning isn’t a “set it and forget it” process. It requires regular check-ins to ensure your documents reflect your current intentions. If you’re unsure whether your beneficiary designation and will align, we’re here to help.
Call (213) 745-8747 in the Los Angeles area or (951) 307-9154 in Inland Empire to schedule a consultation with Vistas Law Group today. You can also reach us online to review your estate plan and safeguard your legacy.