Most people think of a will as the master document of their estate plan — the place where the question “who gets what” is finally answered. For some assets that’s true. For an enormous and growing share of typical American wealth, it isn’t.
Retirement accounts, life insurance, annuities, and many bank and brokerage accounts pass by beneficiary designation, not by will. The form you filled out at HR ten years ago controls the IRA. The card the bank gave you in 1998 controls the joint account. Your will, no matter how well drafted, is downstream of these forms. If they conflict, the forms win.
Three categories of asset, three different rules.
Probate assets. These are assets titled in your name alone, with no beneficiary designation. Real property in your sole name. A solo brokerage account with no TOD. A bank account with no POD. These pass by your will (or, if you have none, by intestacy).
Beneficiary-designated assets. Retirement accounts (IRAs, 401(k)s, pensions), life insurance, annuities, certain bank accounts (POD — payable on death), certain brokerage accounts (TOD — transfer on death). These pass to whomever is named on the form. Your will is irrelevant to them.
Jointly-held assets. Real estate held as tenants by the entirety (married couples) or joint tenants with right of survivorship, joint bank accounts with right of survivorship. These pass to the surviving co-owner by operation of law. Your will is also irrelevant to them.
The mistake we see again and again is clients who carefully draft a will and never look at the second and third buckets. Those buckets often hold the majority of their wealth.
What can go wrong.
The classic disaster: a person remarries, updates their will, and forgets that their 401(k) still names the ex-spouse. The 401(k) administrator pays the ex. The new spouse and the children get nothing from that account. There is no court that can fix it.
Another classic: a parent dies leaving an IRA to a now-adult child — but the form was signed when the child was a minor, and the form is stale or unclear. The default beneficiary (often “the estate”) kicks in. The IRA gets pulled into the estate, loses tax-favored stretch treatment under SECURE Act rules, and triggers acceleration that costs the family meaningfully.
Or this one: a beneficiary form names “my children” without specifying what happens if a child predeceases you. Some institutions interpret this generously (per stirpes, to the deceased child’s descendants). Others interpret it strictly. The grandkids may or may not be covered.
Coordinating designations with the rest of your plan.
The fix is straightforward in concept — tedious in execution — but worth doing.
- Inventory. List every retirement account, life insurance policy, annuity, brokerage account, and bank account.
- Pull the current designations. Many institutions will give you the current designations on request. Some bury it in their online portal. Don’t guess — verify.
- Update what’s wrong, broken, or stale. Use forms that include both primary and contingent beneficiaries, with per-stirpes language where appropriate.
- Coordinate with your will and any revocable trust. Sometimes a designation should go to the trust (so all the assets pour into one structure). Sometimes it should go directly to a person (for tax reasons). The choice depends on the asset and the family.
- Re-title where appropriate. If you have a revocable trust, real property and brokerage accounts you want under the trust have to actually be retitled. Not every account — some, like retirement accounts, can’t be retitled to a trust without losing favorable tax treatment.
The marriage-and-divorce special case.
Two situations deserve their own paragraph:
After marriage. Many spouses assume that getting married updates everything. It doesn’t. ERISA-governed retirement accounts have specific spousal-consent rules; the 401(k) at your old job may still name an ex. Update your designations.
After divorce. Most states have a “revocation by divorce” rule that automatically removes an ex-spouse from your will. The rule is uneven for beneficiary designations — especially for ERISA accounts, which are governed by federal law that often does not automatically revoke. The result: many divorced people are still leaving major retirement accounts to their ex. Update your designations.
Quick FAQ.
If my will leaves everything to my spouse, isn’t that enough? No. Your will only controls probate assets. Designations and joint titling control everything else. We see plenty of plans where the will is perfect and the designations are wrong.
Should I name my trust as a beneficiary of my retirement account? Sometimes. The rules under the SECURE Act are technical, and the wrong choice can accelerate tax. We work through this case by case.
What about TOD and POD designations? They are powerful and underused. New York now even permits a TOD deed for real property. Used carefully, they can simplify estate administration. Used carelessly, they can blow up the rest of your plan.
How often should I check my designations? Every few years, and after any major life event — marriage, divorce, birth, death of a beneficiary, job change. Schedule a review if it’s been a while.