Your Will Alone Won’t Guarantee Your Money Goes to Your Heirs

When Dr. James Rocconi’s third wife left him, he rushed to update his will and other estate-planning documents to ensure she would get nothing when he died. But since the handwritten change he faxed to his insurance company wasn’t accepted, his three children from his first marriage ended up in a six-year legal fight with her over the benefits after he died in 2017. 

---

---

“He told me what he wanted. I wasn’t going to let her win,” said Dr. Tony Rocconi, a veterinarian like his dad, and executor of the estate. 

Rocconi just got his share of the life-insurance money. He donated it to his dad’s church in Camden, Ark., to upgrade the kitchen where his dad used to bring home-baked cheesecake pies to spaghetti supper fundraisers. “I just wanted him vindicated,” Rocconi said.

Many people assume their will is the final word on who gets what when they die. But some documents can override wills, and chances are you have already filled them out: the beneficiary forms for retirement accounts, life insurance, and some bank and brokerage accounts. This is true whether the accounts are opened through the workplace, or on your own.

Get them wrong and your assets could end up with an ex-spouse or in a court battle. Estate planners say this is a growing issue as more Americans juggle multiple accounts, and have more of their net worth in retirement accounts.

“At the end of the day, you’ve got to ensure that the beneficiary forms match your intent and your estate plan,” said Frank Del Barto, an employee-benefits lawyer with Masuda Funai in Schaumburg, Ill., who counsels employers on 401(k) and life-insurance benefits.

The hardest part of Del Barto’s job is writing denial letters to would-be heirs, he said. Sorry for your loss, he has had to tell children and parents, and sorry you aren’t entitled to the money. 

In one common scenario, an employee divorces and names an adult child as his or her new 401(k) beneficiary and then remarries. Under federal law, the new spouse gets the 401(k), no matter what the beneficiary form or will says.

To complicate matters, the rules vary for beneficiary forms for different types of accounts. 

With 401(k)s, married spouses are essentially automatically entitled to the money unless they formally waive it. The waiver must be notarized. If there is no beneficiary listed and no spouse, the employer-plan documents determine who is next in line. 

With individual retirement accounts, by contrast, in most states you can name someone other than your spouse as beneficiary without getting a waiver from your spouse. If you live in a community-property state such as California or Texas, you will need a waiver. If there is no beneficiary listed, the terms of the IRA agreement determine who inherits the IRA, said IRA consultant Denise Appleby in Grayson, Ga.

With insurance payouts, if the policy is a workplace plan obtained through your employer, the employer-plan documents control the payout. If the policy was purchased on your own, the insurance company’s rules govern, and battles typically end up in state court.

That is what happened in the Rocconi case. James Rocconi faxed a handwritten change of beneficiary form, listing his children, to the insurer, but he didn’t sign it, so the insurer didn’t accept it, leaving his ex-wife as the named beneficiary. The children intervened. “He filled out the paperwork. They had voice recordings,” Tony Rocconi said. 

The Arkansas Supreme Court ruled earlier this year that James Rocconi “substantially complied” with the insurance company’s policy requirements to change a beneficiary, overturning the appellate court. Among the evidence presented: On one of the recordings, James Rocconi said, “I’ve got to get her off.” 

Sometimes even the best intent doesn’t cut it if the account owner didn’t finish the process of changing the beneficiary, Del Barto said. Here’s how to bulletproof your beneficiary forms.

Take beneficiary forms seriously

“Beneficiary designations are often an afterthought. People dash them off at home after work,” said Kenneth P. Brier, an estate lawyer in Needham, Mass. Whether you’re filling out new-hire paperwork, or moving an account from one institution to another, you will need to fill out a new form. 

Be sure to include details about your beneficiaries such as date of birth and Social Security number. In one case involving a $1.1 million IRA, Brier said the custodian gave up on finding an heir listed as living in Moscow, with no other identifying information.

Keep documents up-to-date

Failing to update the forms when life circumstances change is a common mistake. If you get married, divorced or have children, make sure you make revisions. Some states have laws that automatically revoke a designation upon divorce, but others don’t, said Robert Barton, an estate litigator with McDermott Will & Emery in Los Angeles. 

With bank and brokerage accounts, people will often add a payable-on-death designation by filling out a special beneficiary form for convenience and then forget about it. That can cause disputes between children who feel they were treated unequally. “An explanation goes a long way,” said Barton.

Make your estate plan

All these accounts and policies should sync with your overall estate plan, or they might not work as intended. Del Barto just redid his estate plan to include a trust for his children, so he updated his 401(k) beneficiary form to make the trust the 100% contingent beneficiary after his wife, who is the primary beneficiary. Without that update, his 401(k) would go directly to his children, not the trust. 

Safeguard beneficiary forms

Keep copies of beneficiary forms with your other estate-planning documents. In a $25 million estate, two siblings fought over a $500,000 bank account, Barton said. One claimed it was a payable-on-death account, naming her as beneficiary, but the bank couldn’t find any paperwork. The case settled, Barton said, but much of the account value was depleted by attorney fees.

Get a stamped copy

Seymour Goldberg, a CPA and lawyer in Melville, N.Y., recommends sending duplicate beneficiary forms to the bank or brokerage house or insurance company and asking for one back with a stamp that says it was received. “You have to prove they got it,” he said.

In some cases you can check online in your account profile to see if the company has made the change you requested.

Write to Ashlea Ebeling at ashlea.ebeling@wsj.com