When most people picture “estate planning,” they imagine Last Will & Testaments or Revocable Trusts. Yet for many families the bulk of wealth—retirement accounts, life-insurance proceeds, and “pay-on-death” (POD) or “transfer-on-death” (TOD) financial accounts—passes outside those documents by simple beneficiary designations.
Crucially, valid beneficiary designations are a contract with the financial institution and therefore override any conflicting provision in your Last Will and Testament. Overlooking—or mis-coordinating—these forms can wreak havoc: tax inefficiency, family conflict, and even delivering valuable assets to an ex-spouse. Here is what every New Yorker should know.
1. Beneficiary Designations: Powerful—and Final
A beneficiary clause directs the institution: at your death, pay Account X directly to the named individual(s). Because title never enters the probate estate:
- The asset bypasses Surrogate’s Court probate or administration entirely.
- Distribution occurs in days rather than months.
- Privacy is preserved (no probate inventory).
- Any contrary wording in your Will is irrelevant; the financial institution must follow the last signed designation on file.
Common examples include IRAs, 401(k)s, Roth accounts, annuities, life-insurance policies, and TOD brokerage or bank accounts.
2. The High Cost of Neglect
- Out-of-date designations. If you never update the form after a divorce, remarriage, or birth of a child, the custodian must still follow the outdated instruction—even if your Will says otherwise.
- Unintended tax bills. The SECURE Act (2019) and SECURE 2.0 (2022) generally force most non-spouse heirs to withdraw inherited retirement accounts within ten years, with new annual-RMD rules starting in 2025. Poor coordination may accelerate income tax.
- Creditor exposure. Naming your estate as beneficiary forfeits the federal creditor protection retirement accounts normally enjoy.
- Former spouses. New York EPTL § 5-1.4 automatically revokes dispositions to a former spouse under a Will upon divorce—but does not automatically revoke a beneficiary form you reaffirm or forget to change afterward.
3. Coordinating Beneficiary Designations With the Rest of Your Plan
Because beneficiary-designated assets never pass through your Will or revocable trust, you must deliberately integrate them:
| Estate Goal | Coordination Tip |
| Equalize inheritances | Adjust TOD percentages to offset specific bequests in your Will. |
| Provide for a minor or special-needs child | Designate a properly drafted trust (not the child outright) as beneficiary. |
| Creditor or divorce protection for adult children | Use an “accumulation” or “see-through” trust that still qualifies for retirement-account rules post-SECURE 2.0. |
4. Best Practices for New Yorkers In Navigating Beneficiary Designations
- Audit regularly. Review designations after every major life event—or at least every three years.
- Name contingent (backup) beneficiaries so the asset never defaults to your estate (and therefore probate).
- Align titles. If your revocable trust owns a brokerage account, its beneficiary clause should dovetail with the trust terms.
- Preserve documents. Keep copies of every signed designation; brokerage websites often purge old forms.
- Watch state-specific rules. New York’s Uniform TOD Securities Registration Act (EPTL Art. 13) governs TOD stocks and mutual funds; banks may offer similar POD features. Ensure the paperwork is properly executed and on file.
5. How RK Law PC Can Help
At RK Law PC we:
- Conduct beneficiary audits to spot inconsistencies during the initial consultation and document execution process.
- Draft see-through retirement-beneficiary trusts that comply with current IRS regulations.
- Navigate spousal-waiver requirements in ERISA-covered 401(k) plans and New York equitable-distribution settlements.
- Coordinate beneficiary designations with Wills, health-care proxies, and Durable Powers of Attorney for a seamless, contradiction-free plan.
For more information, please contact NYC Probate Litigation, Guardianship, Probate, and Estate Planning attorney Regina Kiperman:
Phone: 917-261-4514
Fax: 929-556-2089
Email: rkiperman@rklawny.com
Or visit her at:
40 Wall Street
Suite 2508
New York, NY 10005
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