Beneficiary designations are an important issue in determining where certain assets of an estate end up. Many think a will or trust is what determines where everything goes at death. This is not necessarily so and can be a big mistake to make this assumption. A last will and testament generally determines where things that are titled in your name go. Things such as real estate, cars, bank accounts, and stocks and bonds are included in a will. It is important to realize some assets are owned by contract rather than title that don’t pass through your will.
Assets that are financial contracts can be annuities, life insurance, IRAs and any other type of financial accounts. Each of these contracts may have a beneficiary designation. This designation says who you wanted to name to receive any proceeds at death. If a will says everything goes to Cousin Susie and a client’s beneficiary designations say Uncle Ed, and all of those assets are in contract assets, it may all go to Uncle Ed. Many times what happens is that beneficiary designations were never updated or changed.