When it comes to planning your estate, there are two terms you need to be 100% clear on: beneficiary designation vs. will. Trust & Will breaks them down.
When you first start planning your estate, you’ll run into a lot of unfamiliar terms. There are two terms that are easy to mix up: beneficiary designation vs. will. That’s because the two hold a close relationship, yet they serve different purposes. The goal of this guide is to help you understand the difference between these two important documents, and whether one can override the other.
Ever spent hours carefully planning your will, feeling confident that your assets will go exactly where you want them to after you’re gone? Well, I hate to break it to you, but that carefully crafted document might not be the final word on who gets your money and property.
As someone who’s seen this play out with family members, I know firsthand how devastating it can be when assets don’t flow as expected. At our financial planning firm we’ve seen countless clients shocked to learn that their loved one’s will was essentially overridden by other factors.
The Hard Truth: Your Will Isn’t Always the Final Word
Let’s cut to the chase. Your will is important, but it’s not all-powerful. In fact, there are several things that can completely override the wishes expressed in your will—even if it’s perfectly legal and properly executed.
As Jeffrey R. Gottlieb, an estate planning attorney from Chicago, explained in a recent CNN Business article, “If you have designated beneficiaries on an account and they’re living, that trumps your will or trust — unless the beneficiary designation is to the trust.”
This is a crucial point that many people miss in their estate planning So let’s dive into the specific things that can override your will
1. Beneficiary Designations: The #1 Will Override
The most common will override comes from beneficiary designations on financial accounts and insurance policies. These designations are like mini-wills attached to specific assets, and they typically take precedence over anything your will says.
Here’s what you need to know about beneficiary designations:
- Life Insurance Policies: The person named on your policy gets the money, regardless of what your will states
- Retirement Accounts: Your 401(k)s and IRAs go to whoever is listed on those accounts
- Annuities: These follow the same rules as life insurance
- Bank/Brokerage Accounts: Many allow “payable on death” (POD) or “transfer on death” (TOD) designations
Real-World Example
Imagine this scenario (which I’ve sadly seen happen): A man names his current wife as the beneficiary in his will, but forgets to update his 401(k) beneficiary form, which still lists his ex-wife. When he dies, guess who gets the 401(k) money? The ex-wife—even though the will clearly states everything should go to his current wife.
John Rossi, an Ohio-based attorney with probate litigation experience, notes that “If you don’t name them on accounts, the money gets marshalled into your estate and goes through probate court.” This means more time, more expense, and potentially more drama for your heirs.
2. Living Trusts Trump Wills
If you’ve set up a living trust and properly funded it (transferred assets into it), those assets bypass your will entirely. The trust’s terms—not your will—determine who gets what.
Living trusts offer several advantages:
- Enhanced privacy
- Asset protection
- Ability to avoid probate
- Plans for incapacity
- Continued asset management
But remember, a trust only controls assets that have been properly transferred into it. Assets left outside the trust may still be governed by your will or beneficiary designations.
3. Joint Ownership Arrangements
Assets held with rights of survivorship automatically pass to the surviving owner when one owner dies—regardless of what a will says.
Common joint ownership arrangements include:
- Joint Tenancy with Rights of Survivorship (JTWROS): Property automatically transfers to surviving owners
- Tenancy by the Entirety: Similar to JTWROS but only for married couples
- Community Property with Rights of Survivorship: In community property states, marital assets pass to the surviving spouse
For example, if you own your home jointly with your spouse and have rights of survivorship, the house automatically becomes your spouse’s property when you die—even if your will says you want to leave your share to your children from a previous marriage.
4. Prenuptial and Postnuptial Agreements
Marriage contracts can override will provisions, particularly regarding how assets are to be divided upon death. If you signed a prenup stating certain assets go to specific people, those instructions typically take precedence over conflicting will provisions.
This is especially important for people in second marriages or those with children from previous relationships. Your prenup might protect certain assets for your children, even if your will was written differently later.
5. State Laws That Can’t Be Overridden
Some state laws automatically protect certain heirs, regardless of what your will says:
- Spousal Elective Shares: In many states, your spouse has a legal right to claim a portion of your estate (typically 1/3 to 1/2), even if your will leaves them nothing
- Community Property Laws: In community property states, your spouse automatically owns half of the assets acquired during marriage
- Homestead Exemptions: Some states protect the family home from being sold to pay debts or from being given away from a surviving spouse
6. Outdated or Improperly Executed Documents
Here’s where things get really messy. Sometimes the problem isn’t competing legal documents—it’s poorly maintained ones.
Common issues include:
- Forgetting to update beneficiary designations after divorce, remarriage, or deaths
- Having different beneficiaries named on different accounts
- Unsigned or improperly witnessed wills or trusts
- Contradictory language between different documents
One painful example I’ve seen: A client’s father had remarried but never updated his beneficiary designations on his retirement accounts. When he passed away, his new wife (named in the will) got the house, but his ex-wife (still named on the 401(k)) received over $500,000 in retirement funds. This was definitely NOT what he intended!
How to Protect Your Wishes: 5 Essential Steps
Don’t let your carefully laid plans get derailed. Here’s how to make sure your wishes are actually followed:
-
Conduct a comprehensive beneficiary review at least once every 2-3 years, or after major life events (marriage, divorce, births, deaths)
-
Create a master list of all your accounts and their corresponding beneficiaries to spot inconsistencies
-
Consider a living trust for more complex situations or larger estates
-
Talk to a qualified estate planning attorney who understands your state’s specific laws
-
Inform key people about your plans so there are no surprises later
Red Flags: When Your Will Might Be at Risk
Watch for these warning signs that your will might be vulnerable to being overridden:
- You’ve been divorced or remarried but haven’t updated all your documents
- You have accounts or insurance policies established years ago
- You’ve moved to a different state with different estate laws
- You have beneficiaries with special needs or addiction issues
- You own property in multiple states
The Bottom Line: Consistency is Key
The most important takeaway is this: for your wishes to be honored, all your estate planning documents need to work together consistently.
As financial planning experts, we’ve seen too many families torn apart by inconsistencies between wills and other documents. The emotional toll goes far beyond the financial implications.
“It’s very important to update your beneficiary designation whenever there’s a (big) life change,” says attorney Gottlieb. This advice cannot be emphasized enough.
Your estate plan is only as strong as its weakest link. Don’t let an overlooked beneficiary form or outdated document undermine your careful planning.
FAQs: What Can Override a Will
Can I contest a beneficiary designation?
Possibly, but it’s difficult. You’d need to prove fraud, undue influence, or that the person was not mentally competent when making the designation.
What happens if a named beneficiary dies before me?
It depends on what your beneficiary form specified. Some forms allow for contingent (backup) beneficiaries, while others might default to your estate.
Do I need both a will and beneficiary designations?
Yes! They serve different purposes. Beneficiary designations handle specific accounts, while your will covers everything else and addresses guardianship for minor children.
Can an executor override a beneficiary?
Generally no. An executor must follow beneficiary designations that are legally in place, even if they contradict the will.
What happens if I don’t name any beneficiaries at all?
Without named beneficiaries, most accounts default to your estate and will go through probate, which can be time-consuming and expensive.
Remember, estate planning isn’t a “set it and forget it” task. Life changes, and your estate plan should too. Regular reviews with a professional can help ensure that your final wishes are actually honored when the time comes.
Don’t let your legacy be determined by paperwork oversights or technicalities. Take control now by reviewing all your documents and making sure they work together seamlessly.
Does Beneficiary Designation Override A Will?
You might be wondering, “does a beneficiary supersede a will?” The answer is yes, and that’s why you want to understand the difference between a will vs. beneficiary. It’s important to be very careful when dealing with these two documents.
When you sign off on your Will, you might feel relaxed with the belief that your estate plan is complete. Typically, there’s peace of mind that comes with knowing that your estate will be distributed according to plan.
However, don’t be too quick to relax. Typically, a beneficiary designation overrides a Will. For example, let’s say that you wrote in your will that you want everything to be left to your spouse. You have a retirement savings account, for which you designated your two children as your beneficiaries. At the time of your passing, the retirement savings account designation would supersede anything written in your Will. As a result, the money in the IRA would be transferred equally amongst your two children, instead of your spouse.
When an individual passes away, the instructions in a Will will only distribute assets included in their probate estate. Assets with beneficiary designations get excluded from the estate by default. To avoid any conflict, it’s critical to make sure that the language of your Will correlates with each of your beneficiary designations. It helps to perform a regular review and update your Will or beneficiary designation documents as needed.
Beneficiary Designation vs Will – What’s the Difference
A beneficiary designation is a document that names the individual who will receive an asset in the case of your passing. Beneficiary designations are unique to each asset and are managed by the entity that holds said asset. For example, let’s say you purchase a life insurance policy. The company that holds your policy will likely send you a beneficiary designation document during your enrollment process. In this document, you’d specify which individual should benefit from your policy in the case of your death.
A Will is an estate planning document that describes your wishes and instructions regarding the distribution of your assets. It’s a legally binding document that should hold up in court, providing that you set it up properly.
Wills and beneficiary designations both provide instructions for the distribution of assets, so what’s the difference? A Will provides instructions for all of the assets included in your estate, whereas a beneficiary designation is for a specific asset. Further, a Will is something that you set up on your own accord, whereas a beneficiary designation is a document required by the company holding the asset. Common assets that pass by beneficiary designation include life insurance, retirement accounts, and annuities.