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Certain assets are not affected by wills and trusts

New York individuals who have gone through the process of establishing a will and trust may be interested to find out that a large portion of their estate may not be impacted by these documents. While a trust or will may name certain beneficiaries for passing assets in these documents, beneficiary designation forms affect a number of different types of assets.

Beneficiary designation forms are used on several types of financial products, including life insurance policies, payable on death accounts, retirement accounts and annuities. In the event that a beneficiary form and a will or trust contradict each other, the beneficiary form prevails. These forms include a section where the account owner names beneficiaries and the percentage of the account that the account holder wants each beneficiary to receive. These forms often allow account holders to name contingent beneficiaries in case the original beneficiary predeceases the account holder.

Assets included in beneficiary designation forms also pass outside the probate process as long as the beneficiary is not the deceased's estate. Probate involves a public process that is supervised by the court. This process may take a while to finish, so it can delay beneficiaries from receiving the assets. In contrast, beneficiary-designated assets transfer quickly in a private manner. If no beneficiary is named or all named beneficiaries predecease the decedent, state law or the account terms may determine to whom the account goes.

Individuals who would like to ensure that their intended beneficiaries receive certain assets might discuss various options with an estate planning lawyer. Beneficiary designation forms may be used in conjunction with other estate planning documents, such as a will or trust. Designating certain beneficiaries for the relevant assets may also help a testator provide funds to individuals more quickly than would be accomplished by transfers from wills.

Source: MarketWatch, "Why an air-tight will can’t protect beneficiaries", Robert Klein, September 09, 2014

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