Beneficiary designations
The part of estate planning most people miss — and the one that can override everything else you do.
Beneficiary designations override your will.
Your IRA, 401(k), life insurance policy, and payable-on-death bank accounts all pass directly to whoever is named on the beneficiary form — regardless of what your will says. A will only controls assets that go through probate. These accounts never go through probate.
Accounts to review
Retirement accounts
401(k) / 403(b) / 457 plans
Employer-sponsored retirement plans. Primary + contingent beneficiary.
Traditional IRA
Check both primary and contingent beneficiaries. Ex-spouses are a common mistake.
Roth IRA
Same rules as Traditional IRA. Easily overlooked when opened years ago.
SEP-IRA / SIMPLE IRA
Often opened through a broker and forgotten. Worth verifying.
Pension with survivor benefit
Survivor benefit election made at retirement — review if circumstances changed.
Insurance
Life insurance policies
Term, whole, and universal life. Both primary and contingent beneficiaries.
Annuities
Death benefit goes directly to named beneficiary, bypassing probate.
Employer group life insurance
Often 1–2× salary, automatically enrolled. Many people forget to update after life events.
Bank & brokerage accounts
Bank accounts with POD designation
Payable-on-death (POD) accounts transfer directly to named beneficiary.
Brokerage / investment accounts (TOD)
Transfer-on-death (TOD) registration bypasses probate entirely.
Health Savings Account (HSA)
If beneficiary is a spouse, they inherit the HSA tax-free. Non-spouse beneficiaries owe income tax.
Other
Employer stock / equity compensation
RSUs, stock options, and ESPP accounts may have beneficiary designations.
Deferred compensation plans
Executive compensation arrangements often have separate beneficiary forms.
Common mistakes
Naming a minor child directly
A minor cannot legally receive assets directly. If a minor is named as beneficiary, a court will appoint a guardian of the property to manage the funds — an expensive, public process. Solution: name a trust for minor children, or name a custodian under the Uniform Transfers to Minors Act (UTMA).
Forgetting to update after divorce
Federal law (ERISA) governs most retirement accounts — a divorce decree does NOT automatically remove an ex-spouse as beneficiary on a 401(k). You must update the form with the plan administrator directly. Some states have "revocation on divorce" laws for insurance, but don't count on it.
No contingent beneficiary named
If your primary beneficiary dies before you and there is no contingent beneficiary, the asset goes through probate — the thing beneficiary designations are designed to avoid. Always name at least one contingent (backup) beneficiary.
Naming your estate as beneficiary
This forces retirement accounts and life insurance through probate and can trigger immediate income taxes on inherited IRAs. Almost never the right choice. Name a person or a trust instead.
Beneficiary designation conflicts with the will
Your will says "everything to my children equally" — but your $800,000 IRA still names only your oldest child from a previous marriage. The beneficiary designation wins. Every time. Courts do not override beneficiary designations to match a will.
When to review your designations
- •Marriage or divorce
- •Birth or adoption of a child
- •Death of a named beneficiary
- •Significant change in your financial situation
- •Moving to a different state (some state laws differ)
- •Opening a new financial account
- •Every 3–5 years as a general checkup
Your will controls the rest.
Beneficiary designations handle accounts. Your will handles everything else — property, guardianship, your executor. Free, private, takes about 10 minutes.
Make my will →This information is for educational purposes only and does not constitute legal or financial advice. Beneficiary designation rules vary by account type and state. Consult an estate planning attorney or financial advisor for guidance specific to your situation.