Heirship is designated in the Probate Code of California. Designating a beneficiary ensures that the named person (i.e., the beneficiary) will receive the asset directly upon your death – of course, if they survive you. A beneficiary designation overrides any provisions in a Trust or a Will.
Here's why: beneficiary designations take priority over what's in other estate planning documents, such as a will or trust. For example, you may indicate in your will you want your assets to pass to your spouse after your death.
Any assets a trust doesn't include can be subject to the instructions in the will, meaning a will can override a trust if the trust does not specifically include certain assets. Assets not in the trust must pass through probate.
Some states, by statue or case law, hold that only the beneficiary named in the beneficiary designation form is entitled to these assets, regardless of whether your will, trust or other document specifically identifies the account and names someone else as its beneficiary.
This is a fundamental concept of trust law: the separation of legal and equitable title. In other words, while the trustee has the legal authority to manage and control the assets, they do so not for their own benefit, but for the beneficiaries.
A beneficiary designation or joint title can override your will. Inattention to beneficiary designations and jointly titled assets can quickly unravel your estate plan. Suppose, for example, that your will provides for all of your property to be divided equally among your three children.
Who can void a trust? Under California Probate Code §17200, a trustee or beneficiary of a trust may petition the court to determine the existence of the trust. This means that any potential, current, or previous beneficiary can file a petition to void a trust, as can a trustee or co-trustee.
You might be wondering, “does a beneficiary supersede a will?” The answer is yes, and that's why you want to understand the difference between a will vs. beneficiary. It's important to be very careful when dealing with these two documents.
The trust remains revocable while you are alive; you are free to cancel it, replace it, or make changes as you see fit. Once you die, your living trust becomes irrevocable, which means that your wishes are now set in stone.
While trustees may temporarily be able to delay trust distributions if a valid reason exists for them doing so, they are rarely entitled to hold trust assets indefinitely or refuse beneficiaries the gifts they were left through the trust.
Trustee: Trustees often have more ongoing authority, especially in the case of living trusts or long-term trusts. They may manage and distribute assets over many years, depending on the terms of the trust.
Trusts can provide many valuable benefits to wealthy younger families including: Providing for family members if something should happen to you. Dictating the distribution of your assets to specific beneficiaries. Helping transfer highly-appreciated assets tax efficiently.
Once assets are placed in an irrevocable trust, you no longer have control over them, and they won't be included in your Medicaid eligibility determination after five years. It's important to plan well in advance, as the 5-year look-back rule still applies.
Beneficiaries of trust generally fall into two categories. One type of beneficiary is ultimately entitled to take ownership and control of trust capital and the income it generates as outlined in the trust agreement.
In fact, beneficiary designations take precedence over wills and trusts in most cases, making them virtually probate-proof. Having beneficiaries on your account circumvents the probate process and helps ensure that assets can be transferred to heirs without delay.
A beneficiary designation generally overrides a trust in the same way it overrides a will.
If the estate does not have sufficient funds to fulfill these financial obligations, beneficiaries' inheritances could potentially be reduced or eliminated.
For example, if a will leaves certain assets to a named beneficiary, the next of kin cannot legally supersede those instructions unless the will is successfully contested. Similarly, payable-on-death accounts or life insurance proceeds will go directly to the named beneficiary, regardless of next of kin status.
Wills can also take care of issues that your trust can't—notably, guardianship of your minor children and instructions about what happens to any pets you may have.
Revocable Trusts
Say, for example, that they place their house in a trust, they can then sell the property or remove it from the trust at any time. For these trusts, the assets within them remain part of the grantor's taxable estate, meaning it receives no creditor protection. However, they do avoid probate.
There are a variety of assets that you cannot or should not place in a living trust. These include: Retirement accounts. Accounts such as a 401(k), IRA, 403(b) and certain qualified annuities should not be transferred into your living trust.
Deed of Release or Deed of Amendment
A Deed of Release also demonstrates the intention of a relinquishing beneficiary to be irrevocably removed as a beneficiary of a trust. The irrevocability of the Deed of Release is intended to ensure the removal is permanent.
The main way that the two differ is in how flexible and thorough they are. TOD accounts are faster and more convenient, but a revocable trust offers a stronger plan for you and your beneficiaries that covers the myriad elements of passing away.
A quitclaim deed can be used to avoid probate by transferring interest in real property before someone's death. This prevents the property from going through probate court because ownership is transferred by deed during the grantor's life, rather than begin transferred by a Will after their death.