August is National Make-A-Will Month, making it the perfect time to think about your estate planning. If you’ve been putting it off, let this be your reminder to get started. A Last Will and Testament is one of the most important legal documents you can have.
But here’s something that surprises many people: a will doesn’t control everything you own, and by itself, it doesn’t create a complete estate plan.
In fact, many of the most valuable assets you own may completely ignore what your will says.
When you first opened a 401(k), purchased a life insurance policy, or set up an IRA, you probably completed a simple form naming a beneficiary. You may have listed your spouse or one of your children, signed the paperwork, and never thought about it again.
What you might not realize is that this seemingly routine form created a legally binding contract, one that can override instructions you carefully include in your will years later.
If those beneficiary designations don’t match your overall estate plan, your family members could face unnecessary legal complications and financial stress during an already difficult time.
Do You Need a Will in Texas?
The short answer is yes.
If you die without a will, Texas law determines how your property is distributed through a process called intestate succession. The rules are outlined in the Texas Estates Code, Chapter 201. While many people assume everything automatically passes to a surviving spouse, that isn’t always how the Texas Estates Code works. Depending on your family situation, whether you have children from a previous relationship, or the type of property you own, the outcome may be very different from what you intended.
A will allows you to decide who receives your probate assets, who should care for your minor children, and who will oversee your estate through the probate process.
Just remember: a will is an important part of your estate plan. It simply isn’t the whole plan.
A Will Only Does Part of the Job
To understand why a simple beneficiary form controls over a formal legal document, it helps to understand how assets are distributed after someone dies.
A Last Will and Testament serves as instructions for the probate court. It governs only assets that pass through Texas probate, typically property owned solely in your name without a beneficiary designation or another automatic transfer method. This often includes certain personal property, vehicles, or real estate titled solely in your name.
A beneficiary designation works differently.
When you pass away, the financial institution doesn’t ask what your will says. Instead, it follows the contract you signed when you opened the account. If a beneficiary is listed, the institution transfers the asset directly to that person outside of probate. As explained by Investopedia, retirement accounts, life insurance policies, and payable-on-death accounts are generally distributed according to the beneficiary designation on file, not the instructions in your will.
Because those funds never enter the probate court, your will generally has no authority to redirect them.
Three Common Ways Beneficiary Designations Create Problems
1. Naming Minor Children Directly
Suppose your will states that money left to your children should be managed in trust by a trusted sibling until they reach age 25.
But if you list your minor children directly as beneficiaries on a life insurance policy, your will is effectively bypassed.
Because minors cannot legally receive substantial assets outright, a court must appoint someone to manage the money until the child reaches adulthood. Then, when the child turns 18, the remaining funds are typically distributed outright, regardless of whether the individual is financially prepared.
2. Accidentally Disqualifying a Loved One with Special Needs
Imagine a mother with two adult children, one of whom depends on government assistance because of a disability.
Her will directs part of her estate into a properly drafted Special Needs Trust.
Unfortunately, her brokerage account still names both children as equal beneficiaries.
Because beneficiary designations override the will, the assets from the brokerage account are now owned by the special needs child and the ownership of that asset may jeopardize critical government benefits.
3. The Unintended Ex-Spouse Windfall
Life changes.
People marry, divorce, remarry, welcome children, and change careers. Yet many forget to update old retirement accounts or insurance policies.
If an ex-spouse remains listed as beneficiary on certain accounts, the financial institution may still be legally obligated to distribute those funds according to the beneficiary designation, regardless of what your will says.
Be Careful About Making Changes Yourself
We occasionally see wills with handwritten notes in the margins, crossed-out sections, or pages added years later.
While people mean well, these changes may not be legally effective under Texas law if they aren’t executed with the same legal formalities as required for a will.
Likewise, be careful with the original signed copy of your will. Writing on it, removing pages, or accidentally destroying it can create unnecessary complications later.
Whenever your life changes, it’s far better to review your estate plan with your attorney than to make handwritten changes on your own.
Three Simple Steps to Protect Your Family Today
The good news is that reviewing beneficiary designations is usually fast, free, and doesn’t require a trip to court.
Audit Every Single Account. Contact your financial institutions, HR department, and insurance providers to request a written copy of your current primary and contingent beneficiaries. Don’t rely on memory.
Align Designations with Your Plan. If you want funds to be managed by a trust for minor children or loved ones with special needs, make sure the trust itself (or the testamentary trust under your will) is named as the beneficiary rather than the individual directly. Always consult your estate planning attorney or financial advisor before naming a trust as the beneficiary of an IRA or other retirement account because of the complex tax rules that may apply.
Set a Recurring Review Date. Treat your beneficiary forms like routine maintenance. Review them after every major life event, including marriage, divorce, the birth of a child, retirement, or a significant asset purchase.
Remember, beneficiary designations are only one piece of a complete estate plan. Your will, incapacity documents, trusts (when appropriate), and beneficiary designations should all work together.
The Bottom Line
National Make-A-Will Month is an excellent reminder to take action.
If you don’t yet have an estate plan, now is the perfect time to create one.
If you already have a plan, take a few minutes to make sure your estate plan and your Beneficiary designations, incapacity documents, and other planning tools still work together so your wishes are carried out the way you intend.
A Last Will and Testament remains one of the most important legal documents you’ll ever sign. It just isn’t the last word.
If you’re wondering, “Do I need a will in Texas?” or you’re unsure whether your current estate plan still reflects your wishes, contact us today to schedule a complimentary 15-minute introductory call. We’d be honored to help you create a plan that truly protects the people you love.
This material was created by Packsaddle Law PLLC for educational and informational purposes only. It is not intended as tax, legal, or investment advice. For legal advice tailored to your specific situation, please consult a qualified attorney.