What Happens When Your Will and Your Beneficiary Designations Don’t Match?

By Amanda Dorio, Esq.

You created a will. Maybe you created a trust too. You did the work, so you assume those documents define who gets what when you’re gone, but there’s a catch. In Florida, your will or trust do not automatically control the ultimate distribution of all of your assets.

Think about it this way: What if your IRA names one child as the beneficiary, but your will splits everything evenly among your kids? What if your life insurance policy still lists an ex, or someone you haven’t thought about in years? What if you updated your trust last year but never went back and checked the beneficiary form on your brokerage account?

These aren’t hypotheticals. They happen more often than you would think, and the gap between “what my will or trust says” and “what actually happens” can catch families completely off guard.

Does a Will Override a Beneficiary Designation in Florida?

Generally, changing your will does not, by itself, change a valid beneficiary designation on a separate account, policy or plan. A will governs the disposition of property that passes through the probate estate. Other assets may pass outside probate according to a beneficiary designation or another form of ownership.

For example, an IRA, retirement plan or life insurance policy may allow the owner to name the person or entity that will receive the asset or proceeds at death. Florida also recognizes payable-on-death accounts, under which funds become payable to a named beneficiary after the account holder’s death.

The rules can vary depending on the type of asset. That is why changing a will should not be viewed as automatically changing every instruction governing what happens to your property at death.

A Common Estate Planning Scenario

Picture a Florida father with three adult children. His will directs that all of his assets be divided equally among them. Simple enough.

But years earlier, when he first opened a brokerage account, he filled out a pay-on-death designation form naming his oldest daughter as the sole beneficiary. Maybe she helped him set it up, maybe it just made sense at the time. He forgets all about it. He updates his will later on, but that pay-on-death designation form never gets touched.

He passes away. The brokerage account is now worth $750,000. Here’s the problem: the will’s direction to divide his assets equally among his children does not include the brokerage account because that account had its own beneficiary designation.

The result may be very different from what his children expected, and potentially different from what their father intended when he later updated his will.

What Actually Passes Outside Your Will?

More than you would guess. Life insurance policies, IRAs, 401(k)s and other retirement accounts, annuities, bank or investment accounts set up as pay-on-death or transfer-on-death, and jointly owned property, depending on how it’s titled.

The takeaway: a coordinated estate plan requires looking beyond the will. Beneficiary designations and account ownership can have a significant impact on who ultimately receives your assets.

What If Your Trust Names Different Beneficiaries?

Same problem, different document. Setting up or updating a trust does not automatically change beneficiary designations on your other accounts either.

Your trust controls only the assets that have actually been transferred into it. You can name a trust as a beneficiary on a retirement account, but tread carefully because the IRS has specific rules about how inherited retirement assets are taxed and distributed, and those rules treat trusts differently depending on how they are set up. This is another reason beneficiary designations should be reviewed as part of the overall estate plan.

The bottom line is that it’s imperative that you coordinate your trust with your beneficiary designations now, not after the fact.

What Happens to Beneficiary Designations After a Divorce?

Divorce presents another important beneficiary-designation issue. Florida law provides that certain beneficiary designations in favor of a former spouse become void when the marriage is judicially dissolved or declared invalid, subject to statutory exceptions. Florida Statute § 732.703. But people should not assume that divorce automatically resolves every beneficiary issue.

The Florida statute contains exceptions, and different rules may apply to assets governed by federal law. Retirement benefits are a particularly important example because federal requirements can affect spousal rights and beneficiary designations.

After a divorce, reviewing beneficiary forms along with the will, trust, and other estate planning documents can help identify instructions that no longer reflect the owner’s wishes.

What If You Never Named a Beneficiary?

It depends on the asset. An account, insurance policy or retirement plan may contain provisions specifying what happens when there is no effective beneficiary designation or when the named beneficiary dies before the owner.

Depending on the governing documents and applicable law, the asset may pass to another beneficiary or ultimately become payable to the owner’s estate. If an asset becomes part of the probate estate, its disposition may then be governed by the owner’s will. If the person dies without a valid will, Florida’s intestacy laws may determine who receives the probate property. This is why the beneficiary provisions of the actual account, policy or plan matter.

Can You Just Change a Beneficiary Through Your Will?

Generally, you should not rely on a will to change a beneficiary designation. Financial institutions, insurers and retirement plans typically have procedures for naming and changing beneficiaries. Federal guidance for retirement plans, for example, directs participants seeking to change beneficiaries to follow the applicable plan’s procedures.

If you want to change who receives a beneficiary-designated asset, review and update the appropriate beneficiary documentation rather than assuming that changing your will accomplishes the same result.

When Should You Review Your Beneficiary Designations?

A beneficiary review makes sense whenever you create or update an estate plan. It can also be important after major life events such as marriage, divorce, remarriage, the death of a spouse or beneficiary, the birth or adoption of a child or a significant change in financial circumstances. The review should consider the estate plan as a whole:

• Who is named in the will?
• What property is held in the trust?
• Who is named on retirement accounts and life insurance?
• How are significant bank, investment and real estate assets titled?

Looking at those pieces together can reveal inconsistencies while there is still time to address them.

Bottom Line

You can have a beautifully drafted will or trust and still end up with an unexpected result if beneficiary designations and ownership arrangements tell a different story.

Retirement accounts, life insurance policies, and other assets may pass outside probate according to their governing documents and applicable law. Updating a will or trust does not necessarily update those separate instructions.

Reviewing how assets are titled, who is named as beneficiary and how those arrangements interact with your estate planning documents can help identify potential conflicts and better align the overall plan with your intentions.

If you have updated your will or trust but have not reviewed your beneficiary designations recently, this is a good time to make sure the pieces of your estate plan still work together. For assistance reviewing your Florida estate plan and beneficiary designations, I may be reached at amanda.dorio@henlaw.com.