The Intersection of Your Will/Trust, Joint Accounts, and Beneficiary Designations

Coordinating your Last Will and Testament (or Revocable Trust) with your account ownership titling and your beneficiary designations is an important aspect of estate planning. A joint account or beneficiary designation typically overrides the terms prescribed under your Will, so it’s crucial to ensure they are consistent with your overall estate plan.

For example, if the terms of your Will/Trust direct that all assets should go to your spouse and then your children, but your beneficiary designations direct an account to your parents or siblings (maybe before you had children), that designated beneficiary will receive the proceeds directly, regardless of what your Will/Trust says. Similarly, if you would like a bank account to be distributed in equal shares to your children, but one child is already named as a joint owner, then upon your passing that one child will automatically receive the balance of the checking account and it will not be shared among all of your children (absent a gift by the surviving joint owner child). If you want the account to be distributed differently and in line with your Will/Trust, you’ll need to either update the beneficiary designation or update the ownership of the account.

Furthermore, many clients do not realize that limiting provisions and contingencies under your Will/Trust do not automatically carry over to your beneficiary designations. For example, your Will/Trust may direct that if a child inherits and is under the age of 35, that child’s share should be held in a trust for his or her benefit. However, the beneficiary designation form that you completed says nothing about a trust until age 35 and your child would receive that account outright at the age of 18. Your Will/Trust may also provide for a number of contingencies as to what happens if a beneficiary is not alive and your beneficiary designation might be limited in successor beneficiary options. We routinely customize special beneficiary designation attachments to account for these scenarios and make sure that all of your assets are aligned towards your estate planning goals.

It’s a good idea to review and update both your beneficiary designations and your Will/Trust periodically, especially after major life events such as marriage, divorce, birth of a child, a change in your financial advisor, or the death of a beneficiary or executor. We encourage you to read more about the importance of having a Will and the important steps necessary to coordinate your beneficiary designations, often with a custom beneficiary attachment.

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