William Kennedy named his wife as the beneficiary of his DuPont savings plan. Years later they divorced, and the divorce decree stripped her of any interest in his retirement money. He never updated the form. When he died, DuPont paid her anyway, his daughter sued as executor of his estate, and in 2009 the Supreme Court held that the plan had done exactly what the law required. A beneficiary designation is not a suggestion. It is a contract, and it outranks the will you paid a lawyer to draft.
That surprises almost everyone. It also matters more every year, because the accounts that pass by beneficiary form are where the money now sits. The Investment Company Institute counted $47.6 trillion in US retirement assets as of March 31, 2026, including $18.2 trillion in IRAs and $13.8 trillion in 401(k)-style plans. That is about a third of every dollar of household financial assets in the country, and none of it is controlled by a will. Add life insurance and payable-on-death bank accounts and the beneficiary form governs most of what an ordinary family leaves behind. Trust & Will’s 2026 Estate Planning Report, drawn from a survey of 5,000 US adults in early 2026, found that 56 percent of them have no estate planning documents at all. For most households, then, those one-page forms are the whole estate plan, filled out at a new-hire orientation by someone who was mostly thinking about parking passes.
The Form Is a Contract. The Will Is Only an Instruction.
A will directs a probate court to distribute property that belongs to your estate. It has no authority over property that never enters the estate, and a beneficiary designation is the mechanism that keeps property out. When you name a person on a 401(k), an IRA, a life insurance policy, or a payable-on-death bank account, you are creating a contractual obligation between the institution and that person, triggered by your death. The institution owes them the money directly. So the question people usually ask, whether a will overrides a beneficiary designation, has the answer backwards: probate never sees the account, the executor has no say, and the will’s carefully worded paragraph about dividing everything equally among your children applies to whatever is left over, which may be the car and the furniture.
This is why a bank can release a payable-on-death account within days of seeing a death certificate while the rest of an estate grinds on for months. The bank is simply performing a contract that came due, the same way an insurer pays a claim.
Two Legal Systems Are Fighting Over Your Ex-Spouse
One stale form can produce opposite outcomes on two accounts sitting in the same household, depending on which body of law is holding the pen. Most states have a revocation-on-divorce statute. It treats your former spouse as having died first for purposes of any beneficiary designation you made, so at divorce the money quietly skips to whoever you named as contingent. The Supreme Court blessed those statutes in Sveen v. Melin in 2018, holding that applying one retroactively to a life insurance policy bought before the law existed did not violate the Constitution’s Contracts Clause.
They work on IRAs and on life insurance you bought yourself. They do not touch your 401(k). Employer plans run on ERISA, the federal statute that orders administrators to pay benefits according to the plan documents, and in Egelhoff v. Egelhoff in 2001 the Court held that ERISA preempts state revocation-on-divorce laws outright. The plan follows the form. In Kennedy the Court went further: the plan follows the form even when the ex-spouse has already signed away her rights in the divorce decree, because the administrator’s job is to read the plan documents, not to reconstruct a marriage.
So the divorced worker with an IRA and a 401(k) and an old form naming the ex on both may find that state law quietly fixed one account and federal law locked in the mistake on the other. The clean way to remove an ex-spouse from an ERISA plan is a qualified domestic relations order in the divorce, or a new beneficiary form afterward. Nothing else reliably does it.
A Blank Beneficiary Designation Sends the Money to Probate, the Slowest Possible Answer
When no beneficiary is named, or when the named person died first and no contingent was listed, the plan document’s default order takes over. For a married participant in an ERISA plan the default is usually the surviving spouse, which ERISA also protects on the front end: naming anyone other than your spouse on a 401(k) generally requires your spouse’s written, witnessed consent. If there is no surviving spouse, the default is often the estate, and at that point the account lands in probate after all, with the tax treatment of an estate rather than an individual.
The other trap is wording. Naming three children per stirpes means a deceased child’s share flows to that child’s own children. Naming them per capita means it is split among the survivors instead. Most people never notice which box they checked, and the two produce entirely different families of heirs.
The Money Arrives With a Tax Schedule Attached
Naming the right person is only half the job, because a retirement account arrives with a deadline attached to it. Under the IRS regulations finalized in July 2024 and effective for 2025, most adult children who inherit a traditional IRA or 401(k) fall under the ten-year rule: the account must be emptied by the end of the tenth year after death, and if the original owner had already reached their required beginning date for distributions, the beneficiary must also take an annual withdrawal in years one through nine.
The arithmetic decides the size of the bill. Suppose your child inherits a $300,000 traditional IRA. Spread evenly, that is $30,000 of extra ordinary income a year for ten years, and if it stacks at a 22 percent marginal rate the tax is about $6,600 a year, roughly $66,000 over the decade. Now suppose they ignore it and pull the whole $300,000 in year ten. If half lands at 22 percent and half gets pushed into the 32 percent bracket, the bill is about $33,000 plus $48,000, or $81,000. Same account, same heir, $15,000 difference, decided entirely by pacing. A Roth account inherited under the same ten-year rule comes out tax free, which is why the account type matters as much as the name on the form.
Read Your Own Forms This Month
Every institution holding money for you has a beneficiary field: the 401(k) at the current job and the old one you rolled over, each IRA, the group life insurance at work, the individual policy, the brokerage account with a transfer-on-death registration, the checking account with a POD line. Most of them let you check the current designation online in about a minute. Look for missing contingent beneficiaries, names of people who have died, ex-spouses, and minor children named directly, which forces a court-supervised guardianship over the money until they turn 18 in most states.
A will is still worth having. It names guardians for your children, catches the property nobody designated, and settles arguments. It just operates one level below the forms. The beneficiary designation decides where the money actually goes, and it goes there whether or not that is what you meant by the time you died.