Faulty Beneficiary Designation: Beneficiary Out of Luck
Gift planners rightly tout beneficiary designations as an effortless way to make bequests even in the absence of a will. Sometimes, easy is not so easy. Pity poor Craig Veucasovic. He lost a 50% interest in his mother’s IRA in a most improbable way.
Barbara Veucasovic designated her adult children Michelle and Craig as equal death beneficiaries of her IRA. Fidelity Investments was the custodian. Barbara’s designation stipulated that Michelle would receive her share directly. Craig would receive his through a family trust created for that purpose. (The decision does not explain why Barbara chose to pay the distributions differently.)
When Barbara died, Michelle received her 50% share of the IRA, but there was no family trust to receive Craig’s share. Fidelity refused to pay him directly and rejected Michelle’s puzzling argument that she should receive Craig’s share. The parties submitted the matter to the court.
Relying principally on the fine print of Fidelity’s custodial agreement with Barbara (a document that she certainly never read), the court directed that the 50% share earmarked for Craig belonged to Barbara’s estate since there was no trust. While Craig was a beneficiary of the estate, he wound up sharing the entitlement that his mother intended for his sole use.
TAKE-AWAY FOR CHARITIES: Beneficiary designations are an increasingly common way for testators to transfer significant wealth. This is largely due to the widespread use of IRAs as retirement accounts. To the extent possible, gift planners should periodically try to confirm both the location of a promised account (retirees sometimes change banks/brokers) and the proper and unambiguous designation of the charity as beneficiary. When a supporter shows an intention to make a change in the charity’s favor (such as inserting the organization as beneficiary in place of “my estate”), gift planners need to remember that custodians require strict adherence to their procedures. As in Veucasovic, courts usually defer to the contract governing the account. Notably, provisions in wills do not typically overrule beneficiary designations, even if the latter are outdated.
Veucasovic v. Veucasovic, 2024 WL 3548803 (Mi.App. 2024).
(This blog was originally posted on our LinkedIn on May 22, 2025.)