The beneficiary form on your 401(k), IRA, or life insurance decides who gets that money, no matter what your will says. Pull up every form this week, confirm each primary and backup name, and set a reminder to check them again every few years and after any marriage, divorce, or birth.
A 2009 Supreme Court case shows how far that goes. William Kennedy’s divorce decree said his ex-wife gave up her claim to his DuPont retirement plan, but he never changed the beneficiary form.
When he died, the plan paid her instead of his estate, and the justices ruled unanimously that it was right to go by its paperwork. Retirement accounts, life insurance, annuities, health savings accounts (HSAs), and bank or brokerage accounts marked payable on death or transfer on death all pass by these forms, outside your will. The institution pays whoever it has on file. On a 401(k), though, the Labor Department says your spouse automatically gets the money unless they’ve signed a waiver letting you name someone else. A form nobody updated after a divorce can pay an ex, and one that names only someone who has since died can send the money to your estate and through probate, the court process that settles it.
Set aside an hour and check them all.
- List every account that carries a beneficiary, including life insurance through work and any HSA.
- Log in or call each one, and confirm both the primary and the contingent, or backup, beneficiary. The contingent inherits only if every primary beneficiary has died, can’t be found, or turns it down.
- Don’t name a minor child directly. A minor can’t take control of an inheritance until adulthood, so set up a trust for them and name the trust.
- If you’re married and want someone other than your spouse on a 401(k), your spouse has to sign a written waiver in front of a notary or plan representative.
Then put the next check on your calendar for three years out, and pull the forms sooner after any marriage, divorce, birth, or death.
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