Some of your property does not pass under your Will or Revocable Trust. It passes by its own paperwork, such as a beneficiary form or the way an account is titled. If that paperwork does not match your plan, the paperwork usually controls.
This article explains the common types, what to look for on your forms, and which situations to talk over with your attorney.
Why this matters
Retirement accounts and life insurance are often among the largest assets a person owns. They pass to the people named on the account’s form, even if your Will or Revocable Trust says something different. A form signed years ago can send money to someone you no longer intend to benefit, or leave out someone you do.
Ways property passes outside your Will
The most common are:
- Beneficiary designations: Retirement accounts, life insurance and annuities pay the people named on the account’s beneficiary form.
- Payable-on-death and transfer-on-death accounts: A bank or investment account can name a person who receives the account at your death.
- Transfer-on-death deeds: A deed recorded during your lifetime can pass real estate to the people you name.
- Joint ownership with a right of survivorship: When one owner dies, the surviving owner receives the property.
Property you own with someone else without a right of survivorship does not pass to the co-owner. Your share passes under your Will or Revocable Trust.
Community property agreements in Washington
Married couples and registered domestic partners in Washington may sign a community property agreement. There are two kinds.
- One treats everything the couple owns now or acquires later as community property.
- The other does the same and also passes all community property to the survivor at the first death, without probate.
Only the second kind passes property outside your Will. Your attorney can explain whether either fits your plan. For more, see this article.
What to look for on a beneficiary form
Most beneficiary forms ask for:
- Primary beneficiary: The person or people who receive the account first.
- Contingent beneficiary: The person or people who receive it if no primary beneficiary survives you.
- Shares: How the account is divided among several beneficiaries.
- If a beneficiary dies before you: Some forms let that person’s share pass to their children. A form may call this “per stirpes.” Others give the share to the remaining beneficiaries.
Review your forms after a marriage, divorce, birth or death in your family, and whenever your plan changes.
Situations to talk over with your attorney
Some situations call for care before you name anyone. Your attorney can help you coordinate each one with your plan.
If you are married and the account is community property
In Washington, an account or policy paid for with money earned during the marriage is usually community property. Your spouse owns half of it. You can leave only your half to someone other than your spouse.
If you live in Oregon Oregon is not a community property state. But some couples moved to Oregon from a community property state. An account built up there may still be community property, and the same limit on your half could apply. Tell your attorney where you lived while married. Community property agreements are a Washington option and are not used in Oregon, but if you have an existing community property agreement from time living in a community property state, talk with your attorney about it.
If the account is an employer retirement plan
Federal law gives a spouse rights in many employer retirement plans, such as a 401(k) or a pension. To name anyone other than your spouse, the plan may require your spouse’s written consent. The plan administrator can tell you what the plan requires.
If your plan includes trusts for your beneficiaries
Your Will or Revocable Trust may hold a beneficiary’s share in a trust. This is common for a young adult or a person with special needs. A beneficiary form that names that person directly pays them outright. That can undo the protection the trust was meant to give. Talk with your attorney about whether each account should name the trust instead.
If you want a retirement account to go to a trust
Naming a trust as the beneficiary of a retirement account can work, but it is tricky. The rules for retirement accounts are complex, and the trust must be written with them in mind.
If a beneficiary is a minor
Most companies will not pay money directly to a child. Naming a minor can require a court process before anyone can receive the money for them. Your attorney can suggest other ways to provide for a child, such as a trust or a custodian.
If no beneficiary is named
Most account agreements include a default that applies if no beneficiary form is completed, or if no named beneficiary survives you. The default may be your spouse, if you have one, your heirs, or your estate.
Paying an account to your estate can expose it to income tax and creditors’ claims unnecessarily. Completing a beneficiary form for each account avoids relying on the default.
Gather your forms
Before you meet with your attorney, collect the current beneficiary designation for each account and policy. You can usually find it on the account’s website or by calling the company. A recent statement that lists the beneficiaries also works.
Ask each company for a blank change form as well. The blank form shows the options that company offers, which helps you and your attorney decide what to name.
How it fits with your plan
Your Will or Revocable Trust and your beneficiary designations work together. How to coordinate them is a decision to make with your attorney, so that each account supports the plan you choose.
Beneficiary forms are often updated after your overall plan has been decided and signed, so that each form matches the finished plan.
Want to read more?
These articles are optional.
- Will or Revocable Trust: Choosing the core document for your plan. See this article for Washington or for Oregon.
- Outright or in a trust: How your beneficiaries receive what you leave them. See this article.
- Community property: How it affects your estate plan. See this article.
- Questionnaire help: If you are filling in the questionnaire, see the help for the Asset Details page for Washington or for Oregon.
- Glossary: Common estate planning terms. See this article.