When the beneficiary designation on a deceased person’s bank account conflicts with the terms of their will, the bank beneficiary will typically override the will.
The reason for this is simple: The beneficiary designation is made via a legally binding contract with the bank (called a Totten trust), which operates outside the scope of a will and, by extension, the probate process.
When a bank account bypasses probate, it becomes accessible to the beneficiary immediately after the account holder’s death, rather than being tied up until the close of probate. A bank account bypassing probate may also shield the account from being used to pay off the decedent’s outstanding debts and tax obligations.
Since account holders typically designate a beneficiary on their bank account for the specific purpose of keeping its funds out of probate, the court generally regards a beneficiary designation to be a more direct and reliable reflection of the decedent’s true intent than their will.
That said, there are times when a deceased person’s will may be a truer reflection of their intent than the beneficiary designation on their bank account. Consider the following example.
Suppose a decedent designates her husband as a beneficiary on her bank account after he manipulates her to do so. Years later, she creates a will in which she names her children as beneficiaries of the same account. Does the will supersede the beneficiary on her banking account in this situation?
While it is impossible to definitively say whether the decedent’s will can override the beneficiary on her banking account in this situation without examining both parties’ evidence, it’s safe to say it might. Even though beneficiary designations almost always take precedence over wills, this standard may be thrown out the window if it can be proven a beneficiary designation was not made of the decedent’s own free will, which, in this case, seems probable, given that the decedent had been manipulated by her husband to make it.
A bank account beneficiary designation may also be overridden by a will that expressly contradicts the designation, as this could be viewed by the court as evidence of contrary intent by the decedent. Say a decedent had designated his daughter as the sole beneficiary on his bank account. However, he does this thinking she will divide the funds equally among her siblings, as his will, which he made after the beneficiary designation, stipulates. If the daughter proceeds to disregard the terms of the will and keep the funds entirely to herself, it’s possible the decedent’s will could override the beneficiary designation.
While you should feel empowered to contest a bank account beneficiary designation if you have a valid reason, it’s important to recognize that the process can be challenging. For instance, the beneficiary may have already claimed the funds and spent them by the time you file your lawsuit. Recovering bank account funds in such cases can be complex, making it crucial to have an experienced property dispute attorney on your side.
When Does a Will Override a Beneficiary on a Bank Account?
Although it is rare for a will to override a beneficiary on a bank account, there are specific situations in which it may be possible. However, to overturn a beneficiary designation, the court generally will need to be presented compelling evidence to prove the beneficiary designation either does reflect the decedent’s true intent or cannot be fulfilled as intended.
That said, it’s technically improper to say a will overrides the beneficiary on a bank account or vice versa. Most of the time, when a bank account beneficiary designation is nullified, it will cause the account to transfer to the decedent’s estate, so long as no contingent beneficiary is designated. From there, it will be distributed according to the decedent’s will (supposing it’s valid) or intestate succession laws (supposing no valid will exists).
If you’re uncertain whether a will can “override” a bank account beneficiary, it’s essential you promptly touch base with a knowledgeable property dispute attorney. Delaying legal action increases the likelihood the bank beneficiary will have depleted the funds from the account before you’ve had a chance to claim them.
Predeceased Beneficiary
If the beneficiary on a bank account predeceases the decedent, it may be possible for the decedent’s will to “override” their beneficiary designation, but only if no contingent beneficiary is designated.
In such an instance, it would not be required for the personal representative (i.e., the executor/administrator of the estate) to litigate to claim the bank account for the estate. They simply would need to present the bank with certified copies of both the beneficiary’s and decedent’s death certificates, as well as proof of their identity (i.e., a legally valid photo ID) and authority (i.e., letters testamentary or letters of administration).
Disclaimed Inheritance
If the beneficiary on a bank account refuses their inheritance (i.e., they disclaim it), it may be possible for the decedent’s will to “override” their beneficiary designation, but only if no contingent beneficiary is designated.
Although a bank beneficiary doesn’t need a reason to disclaim their inheritance, they may do so if claiming it would place them in a higher tax bracket or compromise their eligibility for certain government benefits.
Dispute Over Ownership
If someone successfully challenges the ownership of a bank account after a bank beneficiary has already claimed it, it may be possible for the decedent’s will to “override” the beneficiary on their bank account.
Suppose a bank account holder designates his son as the beneficiary on his bank account. Years later, he verbally promises his new wife that he’ll leave the account to her and even alters his will to reflect his intention. He, however, fails to change the beneficiary designation. After the son claims the account, the surviving spouse disputes his ownership rights, claiming the decedent’s failure to change the beneficiary designation was merely an oversight, but that his intention to do so was clear. In this instance, it may be possible for the decedent’s will to “override” the beneficiary on his bank account. The court may consider the terms of the will as evidence of the decedent’s intent to override the beneficiary designation.
When there is a dispute over the ownership of a bank account that has already been claimed, litigation may be required to resolve the dispute, because not only must the beneficiary designation be overturned, but the funds from the account may need to be recovered from the bank beneficiary as well.
Invalid Beneficiary
Did a bank account holder designate a beneficiary on their account after being unduly pressured by the beneficiary to do so?
Did the decedent lack capacity when they designated a beneficiary on their bank account?
Did the decedent designate a beneficiary on their bank account thinking they were filling out another type of form?
In all of the scenarios above, it is possible the beneficiary on the bank account is invalid. Therefore, it may be possible for the will to “override” the beneficiary on the bank account.
Can You Contest a Beneficiary on a Bank Account?
When evidence suggests a bank beneficiary is invalid, the beneficiary designation can generally be contested. That said, to contest a beneficiary designation, you must have what is known as legal standing and grounds.
Legal standing simply means that you have a financial stake in the outcome of the case. If you stand to receive a greater inheritance by winning your case than the inheritance you’re receiving currently, you have standing.
Grounds refers to your reasons for contesting the beneficiary designation. There are only a handful of grounds on which a beneficiary designation can be contested.
What Are the Grounds for Contesting a Bank Account Beneficiary?
To ensure bank account beneficiaries are not erroneously overturned, the court only allows them to be contested on specific grounds.
The grounds for contesting a beneficiary designation on a bank account include:
- Undue Influence: Excessive persuasion or pressure was exerted on the decedent to cause them to override their own free will when designating a beneficiary on their bank account.
- Fraud: The decedent was intentionally deceived or misled by someone to be designated as a beneficiary on their bank account.
- Lack of Capacity: The decedent lacked the mental capacity required to designate a beneficiary on their bank account.
- Forgery: Someone falsified the decedent’s signature on a beneficiary designation document to be designated bank beneficiary.
- Mistake of Fact: The decedent misunderstood the nature of the beneficiary designation document they were signing or its implications.
- Lack of Due Execution: The proper steps weren’t taken to designate a bank account beneficiary.
If you are unsure whether your grounds for contesting a bank beneficiary are valid, it is recommended you schedule a consultation with a skilled property dispute attorney.
FAQs: Bank Account Beneficiary vs. Will
Navigating the complexities of bank account beneficiary designations can be challenging, particularly when they contradict the decedent’s estate planning documents. Check out Keystone’s frequently asked questions below to gain clarity on how bank accounts and wills interact.
If you have further questions, don’t hesitate to reach out to our firm for legal guidance tailored to your needs.
What happens to a bank account when someone dies?
What happens to a person’s bank account after death depends on whether the account holder had converted their account to a Totten trust before they died. As a refresher, a Totten trust is the document you sign to designate a beneficiary on your bank account.
If an account had been converted to a Totten trust, the beneficiary designated on the account could access the account immediately following the account holder’s death. If an account hadn’t been converted to a Totten trust, the account generally will transfer to the account holder’s estate after their death. From there, it will pass through probate and eventually be distributed according to the decedent’s will (given it is valid) or intestate succession laws (given no valid will exists).
What types of assets have beneficiary designations?
Many types of assets can have payable-on-death (POD) or transfer-on-death (TOD) beneficiary designations, including bank accounts, life insurance policies, retirement accounts, and annuities, among others.
Can a beneficiary designation be contested?
Yes, as discussed in this article, a beneficiary designation can generally be contested, so long as you have legal standing and valid grounds for contesting the beneficiary designation.
Keep in mind that contesting a beneficiary designation can be challenging, since the designated beneficiary could theoretically have depleted, sold, or transferred the asset before you’ve even had the chance to file a lawsuit.
Due to the complexities involved in this process, working with a skilled property dispute attorney is crucial.
Does a bank account beneficiary override a trust?
Yes, a bank account beneficiary does generally override a trust. That said, there are specific situations in which a trust could “override” a bank account beneficiary.
For example, a trust may override a bank account beneficiary if it was made after the beneficiary designation and expressly contradicts it. Suppose a trust made after a beneficiary designation clearly states that all of the trust creator’s assets, including their bank account, should be distributed according to the terms of the trust. This could cause the trust to “override” the beneficiary designation.
Can a will override a joint bank account?
No, a will can’t usually override a joint bank account, since the surviving joint owners of an account are automatically granted full ownership of the deceased joint owner’s share of the account upon their death.
Still have questions about when a will supersedes a bank account beneficiary?
When bank account beneficiary designations conflict with the terms of a decedent’s estate planning documents, solutions are rarely simple or straightforward. Therefore, to ensure you receive the inheritance to which you’re entitled, you need a skilled legal team by your side.
Our experienced attorneys can help you assess whether legal action is possible or necessary in your situation and develop a tailored strategy to help you achieve your legal goals. Contact us today to learn how we can assist with your case.
