When it comes to passing on your assets, many people are surprised to learn that beneficiary designations often override what’s written in a will. This misunderstanding can create major issues—especially if life changes like divorce, remarriage, or the birth of a child have occurred since your designations were last updated. In short, when there’s a conflict, the account or policy beneficiary you’ve named usually takes priority, no matter what your will says.
This blog is for New York families, professionals, and high-net-worth individuals who want clarity on how their estate plan works. We’ll explain the difference between designated beneficiaries and wills, how to avoid common mistakes, and why reviewing these documents regularly is critical. By the end, you’ll know how to prevent costly disputes and ensure your assets are distributed according to your true wishes.
What Is the Difference Between a Beneficiary Designation and a Will?
A beneficiary designation is a legal instruction that tells a financial institution who should receive certain assets—like retirement accounts, life insurance, or payable-on-death bank accounts—when you pass away. A will, on the other hand, is a document that outlines your overall wishes for distributing your property, appointing guardians, and managing your estate.
Here’s the key point:
- Assets with beneficiary designations bypass probate and go directly to the person named.
- Your will controls assets that do not have a designated beneficiary (known as probate assets).
- If there’s a conflict, the beneficiary designation typically wins, even if your will says something different.
For example, if your will leaves everything to your current spouse but your old life insurance policy still names your ex, that ex will likely receive the payout—unless you’ve updated the policy.
What Are the Most Common Mistakes People Make?
One of the biggest mistakes we see at The Village Law Firm is assuming that a will automatically overrides outdated beneficiary designations. This isn’t true. We frequently encounter scenarios where people never updated designations after a divorce or the death of a spouse.
Other common missteps include:
- Naming minor children as direct beneficiaries, which can trigger court involvement.
- Forgetting to add contingent beneficiaries (backups) in case the primary beneficiary is deceased.
- Not adjusting allocations based on changes to the value of accounts.
- Leaving designations blank, which can push assets into probate unnecessarily.
If you’re unsure whether your designations match your estate plan, it’s worth reviewing them now rather than leaving your loved ones to sort out a legal mess later.
How Often Should You Review Beneficiary Designations?
A good rule of thumb is to review all beneficiary designations at least every two years and immediately after any major life event, such as:
- Marriage, divorce, or remarriage.
- The birth or adoption of a child.
- A significant change in your financial situation or health.
- The passing of a previously named beneficiary.
During these reviews, make sure your designations align with your will and other documents like trusts or guardianship plans. Regular updates can help prevent conflicts and ensure your estate plan works as intended.
Does New York Law Have Unique Rules About This?
Yes. While New York generally follows the rule that beneficiary designations take priority over wills, there are additional legal nuances to consider:
- Certain notices must be provided to beneficiaries when claims are made.
- New York’s spousal rights laws may impact beneficiary disputes, especially if a spouse is disinherited.
- Specific forms and documentation are required for certain accounts or insurance policies.
These rules can be complex, and failing to follow them could lead to costly litigation. This is where working with a knowledgeable New York estate planning attorney can make all the difference.
What Steps Can You Take Now?
To avoid confusion or legal battles:
- Conduct a full review of your will, trust documents, and all account designations.
- Work with an estate planning lawyer to ensure that beneficiary designations vs. will instructions are coordinated properly.
- Consider updating older plans, especially if your life circumstances have changed.
For additional guidance, see our post on Five Pitfalls of Beneficiary Designations and learn how to sidestep common estate planning mistakes.
FAQs
1. Does a will ever override a beneficiary designation?
Rarely. In most cases, the named beneficiary takes priority. However, exceptions can arise if there is evidence of fraud, outdated forms, or legal disputes involving spousal rights.
2. What happens if I leave the beneficiary section blank?
The asset may end up going through probate and be distributed according to your will—or, if you have no will, New York’s intestacy laws.
3. Should I name my minor children as beneficiaries?
Generally no. It’s better to set up a trust or custodianship to ensure funds are managed properly until your children are adults.
Take the Next Step
Your will alone doesn’t guarantee your assets will go where you intend. The Village Law Firm can review your beneficiary designations and estate plan to ensure they work together seamlessly. Contact us today to schedule a legal planning session and secure your family’s future.
