In Texas, a will controls assets owned by an estate. A trust controls assets owned by the trust. The will, therefore, does not control accounts or assets that transfer by a beneficiary designation of some kind. The will does not control direct transfers by right of survivorship agreements. Why not, you may ask? Well, assets are generally considered part of an estate only when the owner did not establish, prior to death, a legal framework determining who will receive those assets—for example, through a beneficiary designation or trust.
A trust never controls assets that are not directly transferred into the trust during the settlor’s lifetime. In short, beneficiary designations trump a will or trust, not vice versa. An effective estate-planning strategy is to coordinate required beneficiary designations on tax deferred accounts, with the estate planning done in a will or living trust. A careful estate plan will give instructions on how all beneficiary designations and joint ownership should be titled so that the estate plan drafted, whether it is a will or a trust, work to achieve the client’s goal. Without careful planning and management, beneficiary designations can produce unintended consequences.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.
