A son recently came to my Manhattan office holding his late father’s will. It was perfectly executed, clear, and left the entire estate to him, the only child. The problem? The largest asset—a multi-million dollar IRA—still named his father’s ex-wife as the beneficiary from a divorce twenty years prior. The will said one thing; the IRA beneficiary form said another. In New York, the contract wins. The son, the intended heir, received nothing from that account.
This is a common, costly mistake. Many people assume a will is the final word on their entire net worth. It is not. The will only governs assets that pass through the “probate estate.” A significant portion of a person’s wealth often exists outside this process, passing to others by different legal mechanisms. Understanding this distinction is the first step toward true stewardship of your legacy.
Assets Governed by Contract, Not a Will
The most common category of assets that bypass probate are those controlled by a beneficiary designation. This is a simple contract you make with a financial institution, directing where the asset should go upon your death. These instructions supersede any conflicting language in your will.
This category includes:
- Retirement Accounts: This covers 401(k)s, 403(b)s, IRAs, and other pension plans. When you open these accounts, you are asked to name a primary and a contingent beneficiary. That designation is a binding directive.
- Life Insurance Policies: The death benefit from a life insurance policy is paid directly to the beneficiaries named in the policy. The only time it would enter the probate estate is if the estate itself is named as the beneficiary—a strategy we rarely recommend.
- Payable-on-Death (POD) and Transfer-on-Death (TOD) Accounts: These are standard bank and brokerage accounts that have a named beneficiary. Upon presentation of a death certificate, the funds are transferred directly to that person, avoiding the delays and costs of Surrogate’s Court.
The power of these designations is codified in law. New York’s EPTL § 13-3.2 explicitly protects the rights of beneficiaries of retirement and other plans. The law recognizes these contracts as separate and distinct from the terms of a will. An out-of-date beneficiary form is not a minor clerical error; it is a legally binding instruction that can have profound, and often unintended, consequences for your family.
How Property Title Dictates Inheritance
The way you hold title to property—especially real estate and bank accounts—can also place it outside the reach of your will.
In New York, when two or more people own property as “Joint Tenants with Rights of Survivorship” (JTWROS), the asset automatically passes to the surviving owner(s) upon the death of one. It does not matter what the deceased owner’s will says. The right of survivorship is an operation of law, triggered instantly at the moment of death. This is common for a primary residence owned by a married couple or a joint bank account held by a parent and child.
A married couple can also own property as “Tenants by the Entirety,” which provides similar survivorship rights along with additional protections from creditors. In both cases, the property transfer happens outside the authority of the probate court. This can be an effective tool, but it requires deliberate planning. Adding a child to your deed as a joint tenant to avoid probate, for instance, can create immediate gift tax issues and expose the property to that child’s creditors or divorce proceedings.
The Role of a Trust
Finally, assets held in a properly funded trust are not part of your probate estate. This is because you no longer own them—the trust does. A trust is a legal entity that holds title to assets for the benefit of your chosen beneficiaries.
When you create a revocable living trust, you typically act as the initial trustee, managing the assets for your own benefit during your lifetime. You name a successor trustee to take over when you pass away or become incapacitated. That successor trustee then distributes the trust assets according to the specific, private instructions you laid out in the trust document. There is no need for court intervention, public filings, or the lengthy probate process.
A will is a vital document, but it is only one piece of a generational plan. Failing to coordinate your will with your beneficiary designations, property titles, and trust funding can cause the very conflicts and delays you sought to avoid. Stewardship is intentional.
The first step in aligning your plan with your intentions is a thorough review of your assets. I invite you to schedule a meeting with our firm. We will map out your current asset structure and review all beneficiary designations to identify any conflicts with your stated goals.
