Will the money in your retirement account actually go to your children as you intend? Unfortunately, not all New York residents can be sure. While you may list your children as your heirs in your will, you may have actually named someone else as the beneficiary on your retirement account or pension. As an article on the CNBC website points out , some people do not always update their designated beneficiaries, causing many would-be heirs to wage court battles to retrieve assets from a dead relative only to receive nothing for their pains.
Sometimes problems arise in cases involving divorces. Someone may designate a wife or a husband as a beneficiary, but after a divorce, the individual fails to remove the divorced spouse as a designated beneficiary. Thus, when the person dies, the divorced spouse gets the assets instead of children, step-children or other heirs. Beneficiary designations can even trump divorce agreements where the ex-spouse has waived rights to receiving future assets.
In other cases, the designated beneficiary may have passed away before the designator, leaving a retirement account, a 401(k), a savings account or an estate with no living designate to be passed to. If the owner of the assets does not install a new living beneficiary, the assets could land in the middle of a messy court fight to decide how they should be distributed.
Even if you heed the possible pitfalls of beneficiary designations and change your beneficiaries on some of your assets, there is the chance one or two of your designations could fall through the cracks if you are not careful. People generally do not pay equal attention to all of their holdings and it is possible to forget about one or two of them for a long period of time. For example, someone may forget about the name he or she put on a life insurance policy or on a retirement account with a previous employer and fail to update it in time.
Some New Yorkers may believe that beneficiary designations are no big deal if they just name their preferred heir on their will. A will is supposed to be ironclad, right? Actually, when a will and a beneficiary designation conflict, courts will often decide to go with the designation over the will. According to Marketwatch, it is a general rule that whatever name is listed as a beneficiary will trump any wishes expressed in a will or a living trust. So even wills are unlikely to survive a conflict with a beneficiary designation.