There are a few investments that will pass at death to the designated beneficiaries. It won't matter what your will or trust says, some items will transfer only to the beneficiaries you have listed or designated.
These particular investments include Life Insurance, Annuities, Retirement Plan Accounts and both regular IRAs and ROTH IRAs.
Those items will transfer to the beneficiaries you have designated and are recorded in the company or custodian files.
It is easy to forget to verify or update the beneficiary designations. Those should be filed with the other estate planning papers (Will, Trust, Power of Attorney forms).
If you don't have a copy handy, you can call or write to the company or custodian, and they will send you a copy for your files. They will probably also send a form of some sort that could be used to change or update your designation of beneficiaries.
It is best to name the primary beneficiaries and the successor beneficiaries. That provides a planning opportunity if the primary beneficiary wants to decline or refuse the item or part of it by doing a written "disclaimer".
There was a recent court case that shows the importance of beneficiary designations.
A man did not get around to naming anyone to replace his spouse as the beneficiary of his pension plan after she died. He wanted to leave his account to his two stepsons. The court decided the stepchildren did not qualify as children because they were not legally adopted. The plan rules called for "children" to receive the payout of the retirement account.
It might have taken him an hour or so to get the form and designate the stepsons as beneficiaries. Then his desires would have been fulfilled.
We had a client whose husband died but owned a state of Nevada deferred compensation account (retirement plan). He did a lot of things correctly, but he failed to change the beneficiary designation from his previous wife to his surviving spouse. The previous wife got the $100,000 or so in the deferred compensation plan. That was not what he intended, as far as anyone could determine.
You can avoid unintended consequences by just updating your beneficiary designations to account for life changes such as divorce or death of a spouse or some other listed beneficiary. Why not take care of that now?
Did you hear? "There is no one grand stroke that does it. It is a lot of little steps," by Peter A. Cohen.
• John Bullis is a certified public accountant, personal financial specialist and certified senior adviser serving Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs, LLC.
