When a person designates a beneficiary on a non-probate asset, such as a retirement account, the asset will be distributed to that beneficiary when the accountholder dies. Not only is a probate not necessary for the distribution of a non-probate asset to a designated beneficiary, but it is the beneficiary designation – and not a Will – that controls the asset’s distribution.
Changing a beneficiary designation is typically a simple matter of submitting a new form to the financial institution where the underlying account is located. Transferring funds from an existing account to new account that has different beneficiary designations also has the effect of changing beneficiaries. It may be a matter of simple paperwork, but a change in beneficiary designations can have a profound impact on a person who ceases to be an account beneficiary – if the former beneficiary somehow finds out about the change.
The sort of bad blood that can arise from a change of beneficiary designation is at the heart of a dispute involving the estate of the late crime writer, Ann Rule, which was discussed in an unpublished opinion issued by Division I of the Washington Court of Appeals last summer. In the case, In re Estate of Rule, Donna Anders, a former beneficiary of Rule’s retirement account filed a petition under the Trust and Estate Dispute Resolution Act (TEDRA), alleging claims related to the circumstances surrounding the change in beneficiary designations.
Anders was a friend of Rule’s who, in the mid-1990s, Rule had named as executor of her Will and designated as a beneficiary (along with Rule’s four children) of a retirement account. In 2015, Rule executed new estate planning documents. Her General Durable Power of Attorney nominated Barbara Thompson to act as her attorney-in-fact. Rule’s new Will made no mention Anders as a fiduciary or as a beneficiary. In the months following Rule executing her new estate planning documents, Thompson, acting on Rule’s behalf, transferred the funds in Rule’s retirement account from an existing account to an account at the financial institution where Rule’s financial planner then worked. The new account had beneficiary designations that were consistent with Rule’s 2015 estate planning documents. Rule died later in 2015.
Four years later, Anders learned about the change in accounts that eliminated her as an account beneficiary, and she sued Thompson and the recipient of the share of the disputed retirement account funds, alleging that the funds from the Thompson did not have authority to change the retirement account beneficiary designations, and that the funds were wrongfully distributed.
The trial court dismissed the claims, ruling that Anders did not have standing to bring her claims against Thompson, because Thompson, as Rule’s attorney-in-fact, had no duty to Anders. Further, because only the Personal Representative of an estate can sue an attorney-in-fact for breaching their duties to someone who died, Anders could not sue Thompson for breach of fiduciary duty. The Court of Appeals upheld this decision, on the grounds that RCW 11.48.010 provides that a Personal Representative has authority to file lawsuits to seek recovery of assets on behalf of an estate. The court ruled that Anders, a person who formerly would have received a portion of those assets as beneficiary, lacked standing to challenge the attorney-in-fact’s actions on behalf of Rule.
This is not just an interesting case because it involves the estate of a well-known author: It is an interesting example of the types of actions that an attorney-in-fact can make on behalf of someone under a General Durable Power of Attorney. Here, it appears that Rule’s General Durable Power of Attorney gave her attorney-in-fact authority to open and close accounts, and to make beneficiary designations consistent with her estate plan, and it appears that Thompson did just that. If Thompson stepped beyond the bounds of her authority, it was up to the Personal Representative of Rule’s estate to seek recovery – not a disgruntled former beneficiary. How and why Anders ever learned of this account beneficiary designation change is nearly as interesting – although those details were not present in the Court of Appeals opinion.
This post is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting with an attorney.