Q Dear Rick:
I think I been taken advantage of and I wanted to get your opinion. In 2015 my great uncle passed. In his will, he named three beneficiaries: a cousin, an uncle and me. My uncle was in charge of the estate. The will said everything was to be divided equally between the three of us and I did receive a payout. The problem is I have recently discovered that my great uncle had two additional accounts (one of them an IRA) at Fidelity that I did not share in. My uncle said that those two accounts had beneficiaries and were not part of the probate. Before I hire an attorney and cause all sorts of family strife, I wanted to get your opinion as to whether I am entitled to those monies.

Thank you.
Ron

A Dear Ron:
I agree with your uncle that you are not entitled to a distribution from these accounts. Since the two Fidelity accounts had beneficiaries attached to them, only the beneficiaries named would receive those funds. Just because you were in the will would not entitle you to a distribution from those accounts. Thus, you were not taken advantage of and there is no need to hire an attorney.

What confuses many people is they believe a will would take precedence over anything else; but that is not case. When an account has a beneficiary designation associated with it, the beneficiary designation takes precedence. Therefore, since the two accounts at Fidelity had beneficiaries, the beneficiaries named would be entitled to the money, not you. If those accounts did not have named beneficiaries then the will would govern; but that is not the case. In addition if the account was titled as joint tenants with rights of survivorship then that also would take precedence over the will or trust.
There has always been confusion as to who has priority between what is in a will or trust and who is named as a beneficiary. You see this a lot with life insurance. Someone will name a beneficiary on their life insurance policy and eventually when they
write their will they leave the insurance policy to someone else. They make the assumption that if they have a will or trust that will take precedence over a beneficiary designation; unfortunately, it does not work that way. Items such as life insurance policies, IRAs, brokerage accounts that allow beneficiaries, if one is named, that is who will inherit the property not the person named in the will or trust.. That is why it is always so important that your primary and secondary beneficiaries are always up to date. My advice: every year it pays to review your primary and secondary beneficiaries. In addition, whenever there is a change in family situations such as a divorce or a new addition to your family, it also pays to review your beneficiary designations.

Many people may say why name a beneficiary when you can just include it in your will. However, the benefit of naming a beneficiary, where allowed, is that the money avoids probate. I have always been a believer that people should always look for ways to keep judges, courts and lawyers out of family affairs and avoiding probate is one way of doing that. In the great majority of situations, I always encourage people to name primary and secondary beneficiaries. Of course, even if you have named beneficiaries, you still need a will and in some situations, you also may need a trust.

Good luck!

Rick is a fee-only financial advisor. His website is www.bloomassetmanagement.com. If you would like Rick to respond to your questions, please email Rick at rick@bloomassetmanagement.com