Who is the Beneficiary?

There is an order of priority to determine who gets an asset. This is important to understand so that nothing unintentionally goes to the wrong person. Too often people think they have set everything up exactly right, and after they are gone their loved ones realize something is about to happen that would make them roll over in their grave. My goal is to ensure that you understand the rules so you can use them as you please.

First, anything that is in a trust is controlled by the rules of that trust. A trust is not a person, but it can own assets like a person. It has no brain, so you must tell it what to do. This is good because it leaves you in control of what will happen. It can own a house and bank accounts of any kind, if you want it to. Usually, when the “owner” of the trust (called a Grantor or Settlor) dies, then the trust is told to give everything it has to the beneficiaries. Revocable Trusts and some Irrevocable Trusts allow for beneficiary changes so be sure to check if the rules were changed before the Grantor died.

Second, if there is an asset that is not in trust but does have a co-owner who outlives the other co-owner, the asset is now theirs. It did not “go through probate”. They just continue to own it. This can cause trouble when parents add one child to the bank accounts, usually because they are the one who lives closest, and they want that child to be able to pay their bills. The other children could try to argue the account should really be part of the estate, but unless they bother to do that, one of the children might end up getting more than the others.

Third, if there is no trust or co-owner, then the beneficiary designation on the account controls who will get it. Payable on Death (POD), Transferrable on Death (TOD) and beneficiary designation all result in the same thing. The person or people named can collect the money once they are able to prove the owner died, and that they are the correct beneficiary.

Fourth, if there is no trust, no living owner, and no beneficiary, then the Last Will says where the asset goes. However, the Last Will means nothing until it is given to Probate Court, and no one successfully contests it. This means that you will go through probate for these assets. If you do not have a Last Will, then the law has rules about who will get the money. It essentially follows the family tree. This is how the estranged child, or long-lost cousin you never met, gets an inheritance.

I have met very few people who have no opinion about where their hard-earned money should go. Whether it is family, friends, or charities, it is always a good idea to intentionally send assets to where you want. Do not write a Last Will expecting something to happen. If everything you have is in a trust, co-owned, or beneficiaried, then the Last Will is the last stop- and all the assets already left the train!

Attorney Halley C. Allaire is principal in the law firm of Allaire Elder Law, a member of the National Academy of Elder Law Attorneys, Inc., with an office at 271 Farmington Avenue, Bristol, (860) 259-1500, or on the web at www.allaireelderlaw.com. If you have a question, send a note to Attorney Halley C. Allaire and your question may be discussed in a future column.