Ohio Estate Planning surprise: A Last Will and Testament or Trust Agreement may not guarantee assets pass to desired beneficiaries

Some people assume that his or her Last Will and Testament or Trust Agreement will determine who gets the assets upon his or her death.  However, there are other documents that can override the terms of a Last Will and Testament or Trust Agreement and pass outside of the probate estate or trust estate.

These documents include completed designation of beneficiary forms for assets such as retirement accounts, life insurance, bank accounts, brokerage accounts, and real estate.  We are seeing this as a growing issue, as many people have multiple accounts, with the majority of their net worth being held in retirement accounts.  When the accounts are established or updated, it is frequent to see beneficiaries being designated without any thought to the individual’s overall estate plan.  Therefore, it is imperative that the designation of beneficiary forms for these assets comply with current wishes, and are consistent with the terms of the Last Will and Testament or Trust Agreement if the same beneficiaries who receive assets by beneficiary designation are to receive the assets that are distributed pursuant to the terms of the Last Will and Testament or Trust Agreement.

Whether you’re filling out new paperwork, or moving an account from one institution to another, you will likely be asked to complete a new beneficiary designation form.

Failing to update beneficiary designation forms when life circumstances change is a common mistake.  Some changes in family relations that may require updating beneficiary designation forms are:

  1.        Dissolution of a marriage (divorce) or separation.
  2.         Death of a family member.
  3.        Marriage.
  4.        Changes regarding child, grandchild, or other beneficiary.

With a 401(k), a married spouse is essentially automatically entitled to the assets in the 401(k) unless the spouse formally waives receiving the assets by the execution of a formal waiver in the presence of a notary public.  If there is no beneficiary named and no surviving spouse, the employer’s plan documents determine who is next in line to receive the assets in the 401(k).

Under current Ohio law, payable upon death (“POD”) beneficiary designations can be made for bank accounts by completing the financial institution’s beneficiary documents.  By the same context, transfer on death (“TOD”) beneficiary designations can be made for brokerage accounts by completing the brokerage firm’s beneficiary documents.

For real estate, a TOD Designation Affidavit is effective upon death allowing the owner of the real estate to transfer the ownership of real estate upon the owner’s death to whomever the owner designates by name.  To be effective, this TOD Designation Affidavit must be recorded with the County Recorder where the real estate is located prior to the death of the owner.

Please contact Isaac Heintz (513.943.6654) of the Finney Law Firm for help with your estate planning and estate administration needs.