Beneficiary designations that override a will

How it works

A retirement plan, IRA, life insurance policy, annuity, or bank or brokerage account with a transfer on death registration passes by contract to the named beneficiary, outside the will and outside probate. The custodian pays the person on the form, and a court will not rewrite it. Federal law requires a spouse to be the beneficiary of a workplace retirement plan unless the spouse signs a waiver, while an IRA follows the form alone in most states. A spouse who inherits an IRA can treat it as their own, while most other heirs must empty it within ten years under rules the IRS describes. A form naming an ex spouse, a deceased person, or no one sends the asset to the estate, where it is probated and, for a retirement account, can lose stretch options.

What it gives

The asset passes quickly and privately, without probate.

A spouse named on a retirement account keeps the most flexible tax treatment.

The form can be changed any time with the custodian, free of charge.

What it costs, or where the catch is

An outdated form sends money to an ex spouse or a deceased parent no matter what the will says.

Naming a minor child directly leaves a court to appoint a guardian for the money.

Naming the estate or no one forces a retirement account through probate and can shorten the payout period.

A worked example

Walter named his first wife on his 401(k) in 2005, divorced in 2012, and remarried in 2015 with a new will leaving everything to his second wife, Lorna. He never changed the plan form. At his death the $340,000 balance, by federal rules for his plan, is governed by the form on file, and his will does not reach it. Lorna's claim depends on state and plan rules and a court fight, while the $60,000 in his taxable brokerage account with no form passes under the will without dispute.

Where it goes wrong

The common miss is updating a will after a divorce or remarriage and never touching the beneficiary forms, which is where most of the money sits.

Who confirms it for you

For your own numbers, an attorney. This page explains how the rule works for people in general; it does not know your situation and does not tell you what to do.

The official source

IRS Publication 590-B, Distributions from Individual Retirement Arrangements. Every figure that changes by year comes from the site's rules table, which the watcher checks against the official page on a schedule; where a figure is not yet verified, this page says so instead of printing a number.