Why Your Money May Not Go to the Heirs in Your Will

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When it comes to distributing assets to loved ones, a will isn’t always the final word. 

Certain financial documents and contracts can supersede a will, says Richard Ricciardi, an estate and elder law attorney in Fort Myers, Fla. 

Among these are pay-on-death beneficiary designations, where an account owner names another person to receive the balance of funds when the account owner dies. Those accounts include checking, savings, certificates of deposit, retirement accounts such as 401(k)s and IRAs, life insurance policies, and annuities.

So if you are updating your estate plans, make sure all the beneficiary designations on key assets are up to date as well. Otherwise that $2 million 401(k) may not go to the person you want it to. 

Along with a will, you may have signed power of attorney or financial power of attorney documents so that your children or another trusted person can take over your finances should you become incapacitated. That’s prudent. But it’s important that you talk with your financial institutions to find out if there will be any hitches in honoring that agreement should the time come.

Otherwise, there may be big delays while your bank has its legal department study the power of attorney agreement. Sometimes, banks won’t honor them unless they are redrafted, Ricciardi says. That’s a problem when the person granting the power of attorney already is incapacitated, and can’t sign a new agreement. 

You can avoid these situations by signing paperwork at the bank that gives power of attorney for your account to a child or trusted person while you are still in good health. That usually gives the designated person the right to immediately access your account.

So don’t do it unless you completely trust this person. The same goes for power of attorney agreements of any sort.

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