Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Your accounts will pass to your account beneficiaries regardless of your will
Old 03-21-2008, 12:43 PM   #1
Full time employment: Posting here.
 
Join Date: Sep 2006
Posts: 678
Your accounts will pass to your account beneficiaries regardless of your will

This issue came up in another thread, and I thought it was important enough to start a new thread, because I don't think that most people really understand the importance of account beneficiary designations. Some people think that as long as they have a will, all of their assets will pass according to their wishes in their will. But this is simply not true.

For many people, or perhaps most people, having a will is irrelevant to determining how their liquid assets will pass to their heirs, and they don't realize it. The average person has most of their money and liquid assets in financial accounts (mutual fund companies, brokerages, banks, credit unions, savings bonds, etc), and for those accounts, the funds pass directly to the named beneficiaries on your accounts upon your death, regardless of what your will says, or even regardless of whether you have a will. I don't think many people understand this. After your death, your named beneficiary simply has to present a certified copy of your death certificate to the financial institution holding your account, and fill out the appropriate form and confirm their identity as your named beneficiary, and the funds or assets in your account are then transferred to them, as per your beneficiary designation. Even if you have a will, and even if you have an executor or administrator of your estate, the executor of your estate has no right to get involved and has no say in the matter, regardless of what your will says. Therefore, when determining how to pass your liquid assets to your heirs, the most important thing to do is to make sure your beneficiary designations are up to date. For this purpose, you should simply ignore your will, or, ignore the need to have a will in the first place. (There may be other valid reasons to have a will, I am only referring to the issue of passing financial accounts to your heirs)
__________________

__________________
JustCurious is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-21-2008, 01:24 PM   #2
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Keeping these things in mind if you want to equalize what your heirs get. For example, you might have a will that leaves all to your children equally, but one child is named on your bank accounts as a matter of convenience. If you ignore the situation, the child named on the accounts will get more than the others will get, because "equally" only pertains to what passes via the will.

This happened to some friends of mine and the child who got substantially more did the right thing and gifted to his sibs to equalize the distribution.

Wills only serve as instructions for passing along assets that are not addressed in some other way. So, beneficiary designations, joint tenancy, and other mechanisms to pass along assets will trump a will.
__________________

__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Old 03-21-2008, 01:30 PM   #3
Moderator Emeritus
CuppaJoe's Avatar
 
Join Date: Jun 2007
Location: At The Cafe
Posts: 6,866
When I sold some shares last year in my IRA, I called the fund company to verify who was now designated. I was concerned that I had inadvertently cut someone off. I think of those designations as more important than my will as I expect them to have higher balances than the rest of my estate.
__________________
CuppaJoe is offline   Reply With Quote
Old 03-21-2008, 02:00 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,263
Quote:
Originally Posted by Martha View Post

This happened to some friends of mine and the child who got substantially more did the right thing and gifted to his sibs to equalize the distribution.
There could be a possible problem with this is the money is large enough that it is over the $12,000 gift exemption...

And this is my thinking... ask a lawyer to be sure...

I would think that the friend could have renounced (or whatever the correct word is) the account by the beneficiary designation... and then it would have gone to the estate to be distributed according to the estate benes..... and all would have been as the decedent wished...
__________________
Texas Proud is offline   Reply With Quote
Old 03-21-2008, 02:12 PM   #5
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
In their case, the accounts were held jointly with dad and automatically went to #1 son on death. Nothing that could be disclaimed. I don't know that you could disclaim a beneficiary designation.

Anyway, in this case it wasn't that big of a deal. He was out of whack by about $80,000 and the money was gifted to brothers' children to fund 529 plans without running into a gift tax issue.
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Old 03-21-2008, 02:20 PM   #6
Recycles dryer sheets
 
Join Date: Dec 2006
Posts: 424
My 2nd beneficiaries on my accounts are per my will. I don't have a name only listed.
__________________
JohnDoe is offline   Reply With Quote
Old 03-21-2008, 02:29 PM   #7
Moderator
bssc's Avatar
 
Join Date: Dec 2005
Posts: 9,925
Our trust is our beneficiary of our accounts. Makes things easier.
__________________
Angels danced on the day that you were born.
bssc is offline   Reply With Quote
Old 03-21-2008, 03:44 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,639
Quote:
Originally Posted by bssc View Post
Our trust is our beneficiary of our accounts. Makes things easier.
Same here.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is online now   Reply With Quote
Old 03-21-2008, 04:00 PM   #9
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,086
This is a nice reminder - thanks for starting the thread.

Louisiana is still an odd-ball state in that by law I believe half of all your assets must pass to your children, by-passing any surviving spouse. Presumably this law trumps the beneficiary designations. for example, say you are single and name your lover as beneficiary in your accounts, would the law not require the children to receive half?
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 03-21-2008, 04:08 PM   #10
Thinks s/he gets paid by the post
Goonie's Avatar
 
Join Date: Oct 2006
Location: North-Central Illinois
Posts: 3,198
Quote:
Originally Posted by Martha View Post
Keeping these things in mind if you want to equalize what your heirs get. For example, you might have a will that leaves all to your children equally, but one child is named on your bank accounts as a matter of convenience. If you ignore the situation, the child named on the accounts will get more than the others will get, because "equally" only pertains to what passes via the will.
My Mom has named each of my two siblings as beneficiaries on her various annuities and IRA accounts, and I'm a 'Joint Owner' on all of her other accounts, plus the homestead passes to me. It works out that we each will get approximately equal amounts.

All of my accounts have Mom as 'Primary' beneficiary, and my siblings as 'Secondary' beneficiaries

We all learned quite a bit about "getting stuff to the proper people with the least amount of hassle", when my Dad and Grandad were preparing for Grandad's "fading into the sunset". When Grandad eventually kicked the bucket, settling his estate went 'smooth as silk'. We made sure everything would work that way when my Dad passed away also.....it did! Now we have everything set to work smoothly when Mom takes her leave.

Proper preparation sure makes life easier for the survivors!
__________________
Goonie is offline   Reply With Quote
Old 03-21-2008, 04:18 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,639
Quote:
Originally Posted by Alan View Post
This is a nice reminder - thanks for starting the thread.

Louisiana is still an odd-ball state in that by law I believe half of all your assets must pass to your children, by-passing any surviving spouse. Presumably this law trumps the beneficiary designations. for example, say you are single and name your lover as beneficiary in your accounts, would the law not require the children to receive half?
Only if you die intestate. I don't believe any state can just appropriate your funds and do with them as they will.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is online now   Reply With Quote
Old 03-21-2008, 05:49 PM   #12
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,846
I know less than nothing about the law, but as I understand it the Louisiana laws concerning forced heirship were changed in the 1990's so that forced heirship is no longer in effect, except for certain cases such as disabled children.

Me, commenting on the law? That's just plain ridiculous. But I guess on the internet you get what you pay for.

Here's a link:

http://www.lsba.org/2007MembershipDi...rship_tape.pdf
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 03-21-2008, 06:04 PM   #13
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,086
Quote:
Originally Posted by Want2retire View Post
I know less than nothing about the law, but as I understand it the Louisiana laws concerning forced heirship were changed in the 1990's so that forced heirship is no longer in effect, except for certain cases such as disabled children.

Me, commenting on the law? That's just plain ridiculous. But I guess on the internet you get what you pay for.

Here's a link:

http://www.lsba.org/2007MembershipDi...rship_tape.pdf
I believe the law was changed late 1995, but forced heirship still applies if the children are 23 yrs or younger, or incapcitated either mentally or physically to the extent that they cannot live by themselves. It is the only state whose laws are not based on English common law.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 03-21-2008, 06:39 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,263
Quote:
Originally Posted by Martha View Post
In their case, the accounts were held jointly with dad and automatically went to #1 son on death. Nothing that could be disclaimed. I don't know that you could disclaim a beneficiary designation.
Martha.... I thought you were a lawyer....

How can they 'make' you take ownership of anything If you don't want to take ownership of the account you just don't..... it is just like a will IMO, you do not have to accept the assets.


But as always..... I could be wrong...
__________________
Texas Proud is offline   Reply With Quote
Old 03-21-2008, 07:53 PM   #15
Full time employment: Posting here.
 
Join Date: Jan 2007
Posts: 582
Quote:
Originally Posted by Texas Proud View Post
Martha.... I thought you were a lawyer....

How can they 'make' you take ownership of anything If you don't want to take ownership of the account you just don't..... it is just like a will IMO, you do not have to accept the assets.


But as always..... I could be wrong...
Texas - it's because they held the account jointly. The son was already an owner of the account.

bssc and donheff - my understanding is that this is a bad idea, at least for IRAs, because it makes it a little harder to get the money distributed (trusts can't technically be beneficiaries, so the beneficiaries of the trust have to turn in extra paperwork and then it's as though they were named directly). Much easier on the heirs to just name them directly, which avoids confusion and allows them to keep the money in the IRA and take RMDs according to their own life expectancy.
__________________

WM is offline   Reply With Quote
Old 03-21-2008, 07:56 PM   #16
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Quote:
Originally Posted by Texas Proud View Post
Martha.... I thought you were a lawyer....

How can they 'make' you take ownership of anything If you don't want to take ownership of the account you just don't..... it is just like a will IMO, you do not have to accept the assets.


But as always..... I could be wrong...
You could be right. I really don't know if you could refuse the transfer even though the transfer is automatic, I suppose if you never contributed to the account there is a good likelihood that you could. I never have had to face the issue directly.
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Old 03-21-2008, 08:08 PM   #17
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,401
I have multiple dozens of asset accounts (don't ask) and even though I am aware of what JustCurious said in the OP and even though I am probably in the 99th percentile for estate planning among folks my age, I know that most of my accounts do not have named beneficiaries. A few of the larger ones at Vanguard do. I do have a will that leaves most of my stuff to my three kids in equal shares.

I would think that most people probably don't even fill out the beneficiary designations unless required by the institution to do so. Given that, I wonder what percentage of people die intestate. Anyone know?

2Cor521
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 03-21-2008, 08:20 PM   #18
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 16,511
Quote:
Originally Posted by Martha View Post
This happened to some friends of mine and the child who got substantially more did the right thing and gifted to his sibs to equalize the distribution.
That's what happened when my mother passed. I was joint on two accounts because she was having trouble keeping things balanced. I just wrote a letter to the Registrar of Wills office waiving my right to the accounts and that fixed it.
__________________
I heard the call to do nothing. So I answered it.
Walt34 is offline   Reply With Quote
Old 03-21-2008, 09:09 PM   #19
Moderator Emeritus
Khan's Avatar
 
Join Date: Aug 2006
Location: Pine Island, Florida
Posts: 6,868
Send a message via AIM to Khan
I will have to check with the credit union, but in general: can I assign a beneficiary to an existing CD?

And can an non-profit organization be named as beneficiary?
__________________
"Knowin' no one nowhere's gonna miss us when we're gone..."
Khan is offline   Reply With Quote
Old 03-21-2008, 09:55 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,263
Quote:
Originally Posted by WM View Post
Texas - it's because they held the account jointly. The son was already an owner of the account.
Sorry... I read the below quote... which is not a joint account...

the funds pass directly to the named beneficiaries on your accounts upon your death, regardless of what your will says, or even regardless of whether you have a will.
__________________

__________________
Texas Proud is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Naming Beneficiaries JohnDoe FIRE and Money 6 07-02-2007 04:41 PM
How to pass on the nest-egg donheff Young Dreamers 29 02-16-2007 01:27 PM
Email Memo-$16.8 million at stake here.Could I pass as one of the Eich boys poboy Other topics 2 04-01-2006 11:02 AM
Too good to pass up nfs Life after FIRE 4 02-16-2005 06:49 PM
Should you pass up a "great deal"? Nords FIRE and Money 12 07-24-2004 03:33 AM

 

 
All times are GMT -6. The time now is 07:16 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.