What Controls: The Will or "The Box"?

Jeff McKenna

BMO Law

I must first tell you what I mean by "the box."

When I say "the box," I am referring to the beneficiary designation box found in many financial instruments.

For example, life insurance policies, annuity contracts, individual retirement accounts, and other retirement plans allow the owner to designate (usually in a box or line on the form agreement) who is to be the beneficiary or recipient of the proceeds upon the owner's death.

In addition to the above categories of beneficiary designations, many bank accounts, investment accounts, stock certificates and certificates of deposit allow for a Pay On Death beneficiary.

As with the insurance, annuity and retirement account beneficiary designations, the designation of the POD beneficiary is usually done by inserting one or more names in a box or line on an account agreement.

Now that I have explained the question, what is the correct answer?

If someone has designated a former spouse as the beneficiary on a life insurance policy or retirement plan, can a new will designating a new spouse as the beneficiary of all the individual's assets supersede the earlier designation?

In other words, does the designation in the will supersede the designation in the box? The answer is no. In almost all cases, the will does not supersede the contractual designation.

Many people mistakenly believe that the will controls the distribution of all their assets and supersedes any earlier beneficiary designations. It is understandable that many people have this mistaken belief.

First, a will has many formalities associated with it. A will generally has to have the signatures of at least two unrelated witnesses. An attorney normally prepares the will. It is usually notarized. Often much time and thought accompanies the signing of the will, as well as other formalities.

On the other hand, the beneficiary designation is usually very simple. Usually, it involves nothing more than printing or typing a name in a box.

There have been many spouses and children very surprised to learn that, although a loved one's will was reviewed and updated, the older beneficiary designations control.

Another matter to be considered with regard to beneficiary designations is that they are limited.

If the beneficiary designation is just a line or box, there is no opportunity to describe how the proceeds should be used or who should receive the proceeds if one of the named beneficiaries predeceases the owner.

It should be noted that if the beneficiary designated in the financial instrument has predeceased the owner and there is no surviving contingent beneficiary or if the named beneficiary is designated as the "estate," the terms of the will or state statute governing the distribution of assets when there is no will, will then govern the distribution of the proceeds.

In conclusion, proper estate planning involves a thorough review of all assets and beneficiary designations. It is very important that beneficiary designations be coordinated with an individual's estate plan.

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