08 Feb Beneficiary Designation vs. a Will: What’s the Difference?
When you’re planning your estate, it’s important that you understand the difference between a beneficiary designation vs. a will, so you can avoid costly mistakes that might impact your family’s future. At Phelps LaClair, we want to help you design an estate plan that has both your family’s and your own best interests in mind. Continue reading to learn more about beneficiary designations and wills.
Beneficiary Designation vs. Will
What Is a Beneficiary Designation?
A beneficiary designation is a legal document that lists the beneficiaries you wish to receive specific assets after your death. You can make separate beneficiary designations for different assets, including your retirement account and life insurance policy. You can also make a contingent beneficiary designation, which allows your assets to pass on to another person in the event of the primary beneficiary’s death or incapacitation.
What Is a Will?
A will is a legal document that dictates how you wish all of the assets in your estate to be distributed to your beneficiaries after you are gone. When you properly create a will, it prevents your estate from going to probate court. Avoiding probate will save your family time, money, and emotional distress when settling your estate.
What’s the Difference?
While these documents sound very similar, the important difference between a beneficiary designation and a will is that they pertain to different assets. A will covers any assets that you name within the document while a beneficiary designation is a document you specifically create for a single asset.
Understanding this difference will ensure that there is no confusion as to who will receive which asset, and when. For example, when you name a beneficiary directly within your life insurance policy, the proceeds will immediately transfer to them upon your death. On the other hand, the distribution of assets listed in a will can take a few months to a year to complete.
Does a Beneficiary Supersede a Will?
A beneficiary designation does in fact supersede a will. For instance, if you list person “A” as a beneficiary of your retirement policy, but list person “B” to receive that asset in your will, then person “A” will be the one to receive the asset.
Here’s a more detailed example: say that you dictate in your will that you want everything to go to your spouse, but your ex-spouse is the current beneficiary of your life insurance policy. That would mean that your ex-spouse would still receive the proceeds from your life insurance. Your current spouse would then receive everything else. Regularly reviewing and updating your estate plan prevents these kinds of issues and ensures that your present wishes are carried out.
Can a Beneficiary Designation Be Contested?
Anyone can contest the beneficiary designation on a life insurance policy or retirement account. However, contesting a beneficiary designation requires having a valid legal claim. You would have to settle the case in court, where the person making the claim will have to prove that the designation does not reflect the decedent’s wishes regarding the distribution of their assets.
Review Your Estate Plan with Phelps LaClair
If you have any questions regarding the differences between a beneficiary designation vs. a will, don’t hesitate to contact the expert team at Phelps LaClair in Arizona. We’re happy to answer your questions and to help you create an estate plan that reflects your current wishes. If you already have an estate plan, don’t forget to give it a review every three years to ensure that your beneficiary designations are up to date. Call 480-892-2488 today to schedule a consultation.