Quote:
Originally Posted by 911 Rod
When my father passed his beneficiary on his life insurance overrode his will.
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Exactly correct - which is why you must update beneficiary info on your life insurance policies as well as retirement plans. When you list the direct beneficiary (spouse, child(ren), etc) the proceeds are paid direct - circumventing the will. (You probably do NOT want to list your kids on your 401k - instead list your "estate".)
Here's an example of the complications that can surface:
https://www.thebalance.com/why-beneficiary-designations-override-your-will-2388824
Example of Planning Gone Bad
I worked with a client who's wife worked for a large national defense company. It was a second marriage, and when she got ill with a serious cancer, she had a trust drawn up. She wanted her two children and husband to each get one-third of her assets. However, she did not update her beneficiary designation with her 401(k) plan and so that sizeable account all went directly to the husband.
He wanted to honor her wishes (luckily for the kids from her prior marriage), but if he cashed in the 401(k) and paid it to the kids he would have to report all the income on his tax return. He and the kids decided instead to set up an IRA in his name, but with the kids named as the beneficiaries, and they agreed with each distribution he made to them he could withhold enough to cover the taxes. This turned out okay, but will be an ongoing administrative hassle for years. This type of hassle could have been avoided by updating the retirement plan beneficiary form at the wife's employer. (Note: the employer had no choice - they must follow the beneficiary designation form on file and cannot change the distribution after death even if all parties agree to the change.)