Your beneficiary forms outrank your will. Check these four
Retirement accounts, life insurance and transfer-on-death accounts pass by the form on file, not by your will. An old form can quietly override a new plan.
By Leontine Vanterpool
5 min read
A will controls what passes through probate. Many of the largest assets a family owns never go through probate at all. They go to whoever is named on the beneficiary form, even if the will says something different.
1. IRAs and 401(k)s
Check both the primary and the contingent beneficiary. For a 401(k), federal law generally gives your spouse the right to the account unless they sign a written consent to name someone else. Most non-spouse heirs must now empty an inherited IRA within ten years, which changes how much to leave to whom.
2. Life insurance
Policies bought decades ago often still name an ex-spouse, a parent who has died, or children who were minors at the time. A minor cannot take the money directly, so naming a trust or a custodian may be needed.
3. Transfer-on-death and payable-on-death accounts
Brokerage and bank accounts can carry a TOD or POD designation. These are easy to set up and easy to forget. If your plan uses a revocable trust, the trust may need to be the beneficiary instead.
4. Health savings accounts
An HSA left to a spouse stays an HSA. Left to anyone else, it becomes taxable income to them in the year of death. That makes the HSA a good candidate to leave to a spouse or to charity.
Check after every life event
Marriage, divorce, a birth, a death or a new trust are all reasons to review every form. We keep a list of each client’s designations and compare it with the will after every change.
Questions about your own plan, a rollover or a beneficiary form? An advisor reads every message.
