Reed: Who gets the brokerage account?

Sandra W. Reed
Special to the Reporter

Preston has three adult children. When all three children were in their 20s, Preston executed a Last Will and Testament stating that all the assets in his substantial brokerage account were to be divided equally among his three children. He never updated this will.

Sandra Reed

Three decades later, his two sons, Preston Jr. and Jerry, are prominent physicians with lucrative practices. On the other hand, his daughter, Kate, is a retired teacher, who raised her two children as a single mother. Her financial resources are limited. Preston visits his financial adviser at Fidelity and signs a beneficiary designation leaving the account, including its substantial growth in value since he executed the will years ago, to his daughter.

Preston and Jerry take the position that the provision in the Will treating the children equally takes president over the beneficiary designation relevant to the Fidelity account. Who wins the day?

What are non-probate assets?

Non-probate assets are those assets which do not go into an estate when the owner dies. The disposition of these assets is not governed by the decedent’s will. Instead, they pass to the designated individual by virtue of a contract with the financial institution holding the asset. Examples of these non-probate assets are bank accounts, brokerage accounts, insurance policies, and retirement accounts, such as 401Ks and IRAs.

The bank and brokerage accounts will typically have designations of right of survivorship or pay-on-death provisions naming the persons who are entitled to the assets upon the death of the owner. Insurance policies and retirement accounts will often have beneficiary designations stating who receives these assets upon the owner’s death.

Only if the owner of one of these type accounts fails to sign a right of survivorship, pay-on-death or beneficiary designation prior to death, will the proceeds of the account be paid by the financial institution into the probate estate.

What happens if the will and beneficiary designations conflict?

As Preston Jr. and Jerry’s lawyer pointed out to them: when the provisions of a will conflict with the contract made with the financial institution, the contract prevails. Therefore, Preston Sr.’s intent that his less financially secure daughter benefit from his bounty instead of his affluent sons will prevail.

Sandra W. Reed practices, Elder Law in Somervell County, which includes handling probating of estates, drafting of wills, trusts, powers of attorney and deeds as well as estate and Medicaid planning.  She lives on beautiful Chalk Mountain and can be reached at 254.797.0211; 817.946.2809 or at sreed1247@gmail.com.