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Does a beneficiary form override a will?

When doing your estate planning, it's important to know what documents are going to take precedence. This helps you understand how assets will be distributed and what updates you need to make if you want to alter that distribution for any reason.

For instance, maybe you started an IRA or a 401(k) about 20 years ago. You listed your spouse as the beneficiary because you were married at the time and it made sense.

Four years ago, you got divorced. You still have that account and you want to make sure that the money goes to your kids if you pass away. When drafting your will, you specify that they should receive the balance of the retirement account.

So, who gets it? You now have one set of paperwork sending it to your spouse, on the beneficiary forms, and you have another set of paperwork sending it to your kids. Does that beneficiary form override the will?

It does. No matter what your will says, the payment goes to the beneficiary you selected. The same is true for other documents that use the same type of distribution, like a life insurance policy. Whomever you chose gets the payout, even if you're now divorced and even if your will makes it clear that this is no longer what you want.

As you can see, it's critical to update all of your paperwork if you want to make a change. Only by doing so can you ensure that your estate planning wishes really will be followed. Make sure you know exactly what steps you need to take.

Source: 360 Degrees of Financial Literacy, "Choosing a beneficiary for your IRA or 401(K)," accessed Nov. 03, 2017

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