A beneficiary form decides who receives a retirement account, life insurance policy, annuity or transfer-on-death account, and it overrides your will. Review every form after a marriage, divorce, birth or death, and every few years in between. Two rules catch people most often: a divorce doesn’t reliably remove an ex from a workplace plan, and a 401(k) generally has to go to your spouse unless they sign a witnessed waiver. A review takes a few hours. A fee-only planner charges a median $300 an hour to do it with you.
Why the form matters more than the will
For many households, most of the money passes by form, not by will: 401(k)s, IRAs, life insurance and bank or brokerage accounts with a payable-on-death or transfer-on-death registration. FINRA puts it plainly: a TOD plan or other beneficiary document supersedes your will. Nobody can change the form after you die. The beneficiary designation entry in the glossary covers the basics. This guide is about checking yours.
The rules that matter
Your spouse has a right to your 401(k). Most workplace plans must pay a surviving spouse unless the spouse consents in writing to someone else. Federal law requires that consent to be witnessed by a plan representative or a notary public. A form naming your children, signed without that consent, may not hold. IRAs don’t carry this federal rule, but community property states can still give a spouse a share.
A divorce may not take your ex off the form. The Supreme Court counted 26 states with laws that revoke an ex-spouse’s designation at divorce, and in Sveen v. Melin (2018) it upheld one of them for a private life insurance policy. Those laws don’t reach every account:
- Workplace plans covered by ERISA. In Egelhoff v. Egelhoff (2001), the Court held that federal law overrides the state revocation law, so the plan pays whoever its documents name.
- Federal employee life insurance. In Hillman v. Maretta (2013), an ex-wife named on a FEGLI policy kept the proceeds, a decade after the divorce and over the claim of the widow.
The only safe step is to change every form yourself once the divorce is final, as the decree allows. Our guide to blended family planning covers a second case, where an ex who had waived her rights still collected.
Naming your estate, or nobody, costs time and tax. With no individual named, an account usually goes through probate. For an IRA, a beneficiary that isn’t an individual, such as an estate, generally must empty the account within five years if the owner died before their required beginning date. A named person could have had ten years, or longer.
Children can’t take money directly. A minor named on a policy or account usually needs a court-appointed guardian of the estate to manage what they receive. Naming a trust for the children, or a custodian under your state’s transfers to minors law if the plan allows it, avoids the court and lets you decide the age they gain control.
A trust can be the beneficiary, if it’s written for it. IRS rules let the people inside a trust be treated as the beneficiaries of an IRA only if the trust meets specific requirements. An attorney should draft it with your retirement accounts in mind. For a child with a disability, see special needs planning: money left to them directly can cost them benefits.
“Per stirpes” decides what happens if a beneficiary dies first. Per stirpes means a child’s share passes to that child’s own children. Per capita usually means it’s split among the beneficiaries still living. Custodians’ forms differ in what they offer and what they assume if you leave it blank.
How to do the review
- List every account with a form. IRAs and Roth IRAs, 401(k)s and 403(b)s from every past employer, pensions, life insurance (including group cover through work), annuities, HSAs, and bank or brokerage accounts with POD or TOD registration.
- Ask each custodian what it has on file. Don’t rely on your own copy. Log in or call, and get the current primary and contingent beneficiaries in writing.
- Name a backup for every account. A contingent beneficiary takes over if the first one has died. Without one, the account can fall to your estate.
- Compare each form with your will and trust. If the will splits everything equally among three children, check that the 401(k) and the insurance do too.
- Check the tax fit. A traditional IRA is taxed when your heirs withdraw it; a Roth IRA or a taxable account usually isn’t, or much less. Leaving the traditional IRA to a charity and the taxable account to a child can leave everyone with more. See the inherited IRA 10-year rule for how heirs are taxed.
- Keep the confirmations. Save the custodian’s acknowledgment for each change, and put a list of accounts and beneficiaries with your estate documents.
When to review
| Event | What to check |
|---|---|
| Marriage | Add your spouse; a 401(k) may require it anyway |
| Divorce | Remove your ex as the decree allows, on every account |
| Birth or adoption | Add the child, through a trust or custodian if they’re young |
| A death | Replace any beneficiary who has died, and name new backups |
| New job or rollover | A new plan or IRA starts with a blank form |
| New will or trust | Make the forms match the documents |
| A child turns adult or marries | Decide whether they should now inherit directly |
Common mistakes
- Assuming the will covers it. It doesn’t, for any account with a form.
- Forgetting old 401(k)s and group life insurance, which often still name a parent or an ex from years ago.
- Leaving the contingent line blank.
- Naming one child on an account and trusting them to share it with siblings. The money is legally theirs.
- Naming a minor outright.
- Changing a form mid-divorce without asking your attorney first. Some courts restrict changes while the case is open.
Questions to ask a planner
- Will you gather the forms on file at every custodian and compare them with my will and trust?
- Which account should go to which person, after tax?
- Should any account name a trust, and does my trust meet the IRS rules for that?
- Will you remind me to check the forms after life changes?
- How are you paid, in dollars a year?
When a fee-only advisor is worth it, and what it costs
You can review forms yourself if you have a few accounts and a simple family. A planner earns the fee when you have accounts at several firms, a blended family, a trust, a child with special needs, or retirement accounts large enough that who inherits them changes the tax.
| If you want | Option | Typical cost (US median) |
|---|---|---|
| A check of every form against your will | Hourly | $300 an hour (middle half $250 to $350) |
| The forms as part of a full estate and tax plan | One-time plan | $2,000 |
| Someone who checks them every year | Ongoing planning fee | $4,500 a year |
These are prices fee-only firms publish on their own websites, from the Wellspent fee report. If you’re building the whole plan from scratch, start with setting up an estate plan.
Where to look
In the public graph, the estate planning and retirement planning specialties are the natural fit, along with family wealth transfer. Browse family wealth transfer specialists, advisors for pre-retirees or advisors for retirees. After a divorce, the divorced individuals and mid-life transitions pages show who serves those clients.