Challenging Nonprobate Transfers (Beneficiary Designations, Transfer on Death, Pay on Death)

Nonprobate transfers are becoming increasingly popular in estate planning. They are simple, avoid probate and allow certain people to receive your properly immediately upon your death. They can be used by themselves or in conjunction with trust or will-centered estate plans. In application, they  function by automatically and contractually conveying all ownership of a particular item of property or asset to a designated beneficiary or set of beneficiaries upon the owner’s death (e.g, payable on death, transfer on death). Like with wills or trusts, nonprobate transfers can be challenged and voided in court.
A beneficiary designation or a revocation of a beneficiary designation that is procured by fraud, duress or undue influence is void. See Section 461.054, RSMo. One must have the requisite capacity to properly create a beneficiary designation. Be aware, however, that the legal capacity required to create a beneficiary designation is higher than the capacity required to create a trust or will. Specifically, the capacity to execute a nonprobate transfer document is closer to the capacity required to make a contract: one must have a higher understanding of the terms of the document and be able to conduct arm’s length transactions with an appreciation of the nuances of the deal. On the other hand, the capacity to create a will or trust is that one need only understand the ordinary affairs of life, the natural objects of their bounty and adequately understand and appreciate their finances. Accordingly, it is easier to challenge a nonprobate transfer for lack of capacity than it is to challenge a will or trust for lack of capacity.
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