Writing a will is one of those areas in life where you can be sure you have the final word -- unless you mess up. If you make beneficiary designations on certain accounts or assets, they will often override the terms of your will if you try to use it to leave the asset to someone else. However, this doesn’t hold true in all states. In some jurisdictions, your will can prevail if it specifically states that you want it to override a beneficiary designation.
Wills can’t address the disposition of non-probate assets. This includes property that you placed in a trust or accounts that have specific beneficiary designations, like life insurance, retirement accounts or payable-on-death bank accounts. Because they’re not part of your probate estate, the terms of your will have no effect on them unless your state’s laws specifically provide otherwise. The executor of your estate has no power or authorization to give them to anyone you might name in your will.
By law, a retirement account must be held in the name of a specific person and it can only pass to a named beneficiary. The only way a retirement account can become part of your estate and be controlled by the terms of your will is if you name your estate as the beneficiary of the account or if you don’t designate a beneficiary at all.
Bank accounts with named beneficiaries fall outside your probate estate because they’re contractual -- meaning they’re governed by a contract between you and your bank. The person you named as beneficiary on a payable-on-death account need only go to the bank, provide ID and a copy of your death certificate, and the bank will release the funds to her. She may do this even before your will is submitted to the court for probate.
Changing Your Beneficiary Designation
Because the odds are in favor of your beneficiary designations superseding your will, it’s a good idea to review them whenever you experience a significant change in life, such as divorce. If your will contradicts the terms you set on an account years ago, it could have a serious effect on the estate plan you thought you put into place. Some states provide that in the event of divorce, payable-on-death beneficiary designations naming your ex are automatically cancelled just as bequests you made in your will would be, but check with a local attorney to make sure. In other states, even if your divorce decree or settlement agreement provides that the designation is null and void, this may not be controlling on the financial institution that holds the account or on insurance companies that carry your life insurance policy. Third parties are not bound by the terms of your divorce or your decree.