Updating estate plans and reviewing beneficiary designations are essential estate planning tasks, more important than most people think. They’re easy to fix while you are alive, but the problems created by ignoring these tasks occur after you have passed when your Personal Representative (Executor) can’t easily fix them or can’t be fixed at all. The article “Who gets the brokerage account?” by Glen Rose Reporter shares one family’s story.
The father of three children had an estate plan done when they were in their twenties. His Last Will and Testament directed all assets in a substantial brokerage account to be equally divided between the three children.
His Last Will was never updated.
Thirty years later, his two sons are successful, affluent physicians with high incomes. His daughter is a retired educator who had raised two children as a single mom and struggled financially for many years.
When her father met with his investment advisor, he signed a beneficiary designation leaving the substantial brokerage account, including the considerable growth occurring over the years, to his daughter.
When he dies, the two brothers claim his Last Will, dividing all assets equally, which must be the final word. They insist that the brokerage account be divided equally among the three children.
Any assets held in an account with a beneficiary designation are considered non-probate assets. They do not pass through the probate process. The Last Will does not control their disposition. The contract between the institution and the individual is paramount.
Insurance policies, retirement accounts, bank, and brokerage accounts usually have these designations. They often include a pay-on-death provision, and the person who is to receive the assets upon the owner’s death is named.
If the account owner fails to sign a right of survivorship, pay-on-death, or name a beneficiary before they die, then the assets are paid to the probate estate. However, this is to be avoided since it complicates what could be a simple transaction.
Despite their wishes, an estate planning attorney correctly advised the two sons of their sister’s full and protected right to receive the investment account. When the provisions in the Last Will conflict with a contract made between an owner and a financial institution, the agreement prevails.
In this case, a less financially secure daughter and her family benefited from the wishes and foresight of her father.
Last Wills and beneficiary designations need to be reviewed and revised to ensure that they reflect the parent’s wishes as time goes by.
Reference: Glen Rose Reporter (Jan. 13, 2022) “Who gets the brokerage account?”
