The Listen to Lawrence Letter: Beneficiaries – what happens if the asset says one thing and the trust says another?

February 6, 2023
January 10, 2023 • Volume 4 Issue 104
Dear Clients and Friends,
Who is the beneficiary of a trust asset?


An asset has A and B as beneficiaries.  This asset is transferred to a trust naming C and D as beneficiaries.  If nothing is changed and the trustor dies, who gets the asset?


Oh boy, what a screwup!  The asset says one thing and the trust says something else. Who should prevail?  In the end, the answer may be uncertain. However, generally speaking, the direct beneficiary designation on an account SHOULD prevail.

We all know that if you own a brokerage account naming your son as beneficiary, but you have a last will and testament that says that your daughter gets everything, then your son is entitled to receive the account. The beneficiary designation takes precedence over the will, as it may very well with the trust. Clearly, this discrepancy should have been exposed, discussed, and decided. Clearly, the trustee, as owner, should have filled out new forms (as the new owner) designating coordinated beneficiaries, or no beneficiary on the asset (as the trust would have supplied the ultimate beneficiaries). The fact, however, that we have conflicting designations may pit the beneficiaries against each other. Are there any tangible facts that make it clear that the trustor intended it to go one way or the other? This kind of problem could potentially lead to litigation.

As a practical matter, in 37 years of practicing in this area, I have never seen this be a problem. When an asset is transferred into a trust, new accounts will have to be created, and new beneficiaries are coordinated at the same time.

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Until next time...peace, health and happiness. Lawrence Eric Davidow