Bank Account Beneficiary Rules: What You Need to Know

The Potential Pitfalls of Beneficiary Designations

Are you wondering if beneficiary designations can serve the same purpose as a will? Will such designations guarantee your money is distributed to your wishes when you’re gone? In this clip, Margaret Barrett explains that working with an estate planning attorney is the best way to make sure that your wishes are followed in the event of your passing. She explains just some of the disadvantages of beneficiary designations and makes the case for turning to an estate planning attorney for creating a plan that will provide you and your family peace of mind.

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What You’ll Learn From This Video

  • Beneficiary Designations may not work well under certain circumstances.
  • An estate planning attorney can help you direct your money how you want.
  • Having a sound estate plan provides peace of mind!


Margaret Barrett: You may be wondering, “Can I just put beneficiary designations on all my accounts? If I do, will the money go where I want it to go without problems?” We hear this question a lot. And because we handle a lot of estates, we see what can go right and can go wrong with beneficiary designations. One of our attorneys recently met with a couple with a good size estate. They asked, “Can we just keep our will and use beneficiary designations on all our accounts? Will that work out? Will our financial advisor have our back?” Well, even if your financial advisor has your back, and I hope they do, and even if they’re experienced and knowledgeable and capable, that does not guarantee that your money will go where you want it to go and without a hassle. That is because your financial advisor cannot change the law, and they are not an experienced estate attorney.

After you’re gone, they can’t make sure you can avoid probate or change any of the terms of your will or beneficiary designations. The financial institution terms and the law is what’s going to determine what happens to your estate based on your will and on your account titles and beneficiary designations. Some of the problems we see with beneficiary designations include the beneficiary designation could be wrong, the financial institution may have not updated it or have updated it improperly, or it may not have been designed by an experienced estate attorney. Another problem we see is that circumstances may have changed, and now your beneficiary designations don’t work the way you want it. For example, if your son died before you, his share may end up going to his wife, when you really would’ve wanted it to go in trust for grandchildren.

Beneficiary designations don’t work well with certain groups of people sometimes. For example, if minor children are inheriting, someone will need to go to court and have a trust set up for them, and the court will decide the terms of the trust and who is the trustee instead of you getting to decide ahead of time. They also don’t work well in blended family situations and all the complications and dynamics inherent in there. If the beneficiary inheriting has special needs, inheriting outright, instead of in a special or supplemental needs trust, can cause real problems for them. And finally, people who don’t handle money well, for any reason, even if it’s temporary, would be better off with the trust than receiving money outright through a beneficiary designation.

So even a good, trusted financial advisor who does have your back can’t guarantee that your money will go where you want it to go with minimal hassle and expense. You are the only person who can create an estate plan for you ahead of time, working with an experienced estate attorney. We want you to have the peace of mind of knowing that you have done what you can to ensure your assets go where you want and provide maximum protection to your loved ones, even if the unexpected happens. Call us today, and we can educate you on the pros and cons of beneficiary designations in your situation at no cost.

Author Bio

Margaret Barrett is the Founder and Owner of Safe Harbor Estate Law, a Saint Paul, MN, estate planning law firm she founded in 2013. With almost 15 years of combined experience in litigation and Minnesota estate law, she is dedicated to representing clients in a wide range of estate law matters. Her practice areas include estate planning, asset protection, elder law, and more.

Margaret received her Juris Doctor from the William Mitchell College of Law and is a member of the Minnesota State Bar Association and the Ramsey County Bar Association.

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