The beneficiary listed on your 401k, IRA, and life insurance policy receives those assets regardless of what your will says. An ex-spouse, a deceased parent, or a forgotten name can inherit funds your will directs elsewhere. Review every beneficiary designation after any major life event: marriage, divorce, death, or a new child.
These accounts move outside your estate entirely. A 401k, IRA, or life insurance policy is a contract, and the company holding it pays whoever is named on the form without checking your will, your trust, or your divorce decree.
The Supreme Court showed how rigid this rule is in Kennedy v. DuPont. A Texas man divorced in 1994, and his ex-wife signed away her claim to his retirement plan in the decree. He never updated the form. When he died, the plan paid her the roughly $400,000 balance anyway, and the Court upheld it unanimously. Federal law tells workplace plans to follow the document on file, even in states that automatically revoke an ex-spouse’s claim after divorce.
An outdated form fails in quieter ways too. If your named beneficiary has already died and no backup is listed, the money usually lands in your estate and goes through probate. These accounts were designed to skip that slow court process.
The fix takes one afternoon. List every account that carries a designation: retirement plans, pensions, life insurance, annuities, health savings accounts, and any bank or brokerage account with a payable-on-death instruction. Log into each one, confirm the primary beneficiary is who you want today, and name a contingent beneficiary as the backup.
Old employer plans count too. A 401k left at a job you quit a decade ago still pays its listed name. And if you’re married, your spouse is automatically first in line on a workplace plan unless they sign a notarized waiver. Most providers process updates online in minutes. No lawyer required.
Then put the next review on your calendar, two or three years out. Your will records your wishes. Your beneficiary forms decide where the money goes.
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