Does a Will Override a Beneficiary
- A will is a document a person -- referred to as a testator -- uses to list the people he wants property and assets, such as his house and money, to go to. The will also names an executor who is responsible for handling the estate and presenting the will in probate courts after the testator's death. The testator can name beneficiaries when opening some types of asset accounts, including retirement plans such as a 401k and individual retirement arrangement, and for his insurance policies.
- The executor transfers assets to the persons named in the will but does not have control over property that is not subject to probate proceedings. Assets that have a named beneficiary typically pass outside of probate, so the will's provisions cannot override the beneficiary form. Once the testator dies, the beneficiary is entitled to the funds. She uses the claim procedures set by the holder of the account or insurer of the policy to get the money.
- Recipients under a will receive what the testator lists, but some wills do not contain specific bequests. The testator may use a will to leave his entire estate to one or more people, but only property included in probate passes under the will. A beneficiary may pay less taxes on money received than a person who receives her inheritance through probate, according to Clint Willis of Fidelity Investments. For example, 401k money that passes through probate is taxable, but the named beneficiary of a 401k has the option of moving the money to another qualified retirement account for herself to avoid taxes.
- The testator can name her estate as the beneficiary, making the money part of the probate process. The terms of the will govern the distribution of the money in that case. The testator also can name a trust as the beneficiary of the account or life insurance policy. The named trustee of the trust becomes responsible for managing the money along with the other trust assets.
