I once met with the children of a successful Manhattan executive who had recently passed away. They brought me their father’s will, a carefully drafted document that left his substantial estate to be divided equally among them. The problem? The largest single asset he owned—a seven-figure retirement account—wasn’t mentioned. He had opened that account decades earlier, before he was even married, and named his sister as the beneficiary on a form he likely never thought about again. His will was clear, but it was also powerless. The entire account passed directly to his sister, outside of his estate and contrary to his written wishes.
This is a story I have seen play out in different ways over my career. It reveals a fundamental misunderstanding about how assets transfer after death. A will is a critical document, but it controls only “probate assets.” Many significant assets are “nonprobate assets,” which pass according to a completely different set of rules.
The Two Paths an Asset Can Take
When we design an estate plan, we account for every asset. Each one will follow one of two paths. The first path is through probate, the court-supervised process overseen by New York’s Surrogate’s Court. Assets on this path are distributed according to the terms of your will—or, if you have no will, according to state intestacy laws.
The second path bypasses probate entirely. These nonprobate assets are transferred directly to a new owner based on a contract or legal titling. They are not subject to the instructions in your will. This category includes some of the most common and valuable assets people own:
- Retirement Accounts: Your 401(k), 403(b), IRA, or other qualified retirement plans are all governed by a beneficiary designation form. The person or trust you name on that form receives the funds, period.
- Life Insurance Policies: Like retirement accounts, the death benefit from a life insurance policy is paid directly to the named beneficiary.
- Jointly Owned Property: Real estate, bank accounts, or brokerage accounts owned as “joint tenants with right of survivorship” automatically pass to the surviving joint owner.
- Payable-on-Death (POD) and Transfer-on-Death (TOD) Accounts: These are bank and brokerage accounts where you have formally named a person to inherit the account upon your death.
- Assets Held in a Trust: Any asset properly titled in the name of a living trust is controlled by the terms of the trust document, not the will.
The issue is not that nonprobate assets are bad; they are an efficient and important part of modern estate planning. The danger arises when they are not coordinated with the rest of your plan.
Beneficiary Designations: The Forgotten Contract
The most common source of conflict I see involves outdated beneficiary designations. People sign these forms when they start a new job or open an account, file them away, and forget about them. Life moves on—people get married, divorced, have children, or suffer the loss of a loved one—but the beneficiary forms remain unchanged.
A divorce is a prime example. You might update your will to remove your ex-spouse, but if you forget to update the beneficiary designation on your old 401(k), they may still be legally entitled to that account. New York law does offer some protection here. Estates, Powers and Trusts Law (EPTL) § 5-1.4 automatically revokes dispositions to a former spouse in a will, and it extends this protection to beneficiary designations on assets like life insurance and retirement plans. However, relying on a statute to clean up an oversight is a poor contingency. Federal laws governing some retirement plans can complicate matters, and it is far more prudent to be deliberate and intentional with your planning.
Failing to name a contingent (or secondary) beneficiary is another common mistake. If your primary beneficiary passes away before you and you have not named an alternate, the asset may be forced back into your probate estate, defeating the purpose of the designation and potentially creating a tax headache for your heirs.
Stewardship Requires a Holistic View
Effective estate planning is an act of stewardship. It is about creating a clear, coherent plan that ensures your legacy is passed on to the right people in the right way. A will is just one tool to accomplish this. True stewardship requires looking at the entire picture—every account, every policy, and every piece of property.
This means we do not just draft a will. We conduct a thorough review of how every asset is titled and who is named as the beneficiary. We work with our clients to ensure these nonprobate transfers align with the goals laid out in their will and trust documents. Sometimes, the right move is to change a beneficiary designation to an individual. Other times, it makes more sense to name a trust as the beneficiary to provide long-term management and protection for the recipient.
The goal is to leave nothing to chance. When every asset is accounted for and every designation is aligned, you remove ambiguity. You prevent the kind of shock and conflict the executive’s children experienced. You ensure your plan works exactly as you intended.
The first step toward this alignment is often a simple inventory. If you are unsure whether your nonprobate assets are coordinated with your will, I suggest gathering the most recent statements for your life insurance policies, retirement accounts, and annuities. Our firm can then guide you through a systematic beneficiary designation audit to confirm they reflect your current wishes.
