Here’s something that trips up families constantly, and it matters more than most people realize.
When someone passes away, their will tells the world who gets their stuff — their house, their car, their savings account. But certain accounts don’t work that way. Life insurance policies, IRAs, 401(k)s, and similar retirement accounts have their own special paperwork called a beneficiary designation. And whoever is named on that form gets the money — not whoever the will names.
The will doesn’t override it. A newer will doesn’t override it. The only way to change who gets that money is to update the beneficiary form itself. The form controls.
So picture this: someone writes a will leaving everything to their kids. But years earlier, they filled out their 401(k) paperwork at work and named their sibling as beneficiary — and never changed it. When they die, the sibling gets the retirement account. Full stop. The kids can be upset, the lawyer can be confused, it doesn’t matter. The form controls.
This gets even messier with divorce. A federal law called ERISA governs most workplace retirement plans like 401(k)s. The Supreme Court has ruled that ERISA requires plan administrators to pay whoever is listed on the beneficiary form — even if that person is an ex-spouse. Some states try to pass laws that automatically remove an ex from these designations, but federal law overrules them for workplace retirement plans. So if your dad never updated his 401(k) after the divorce, his ex could legally receive that money over you.
Note: IRAs work a little differently — they’re not covered by ERISA, so state laws may apply, and the outcome can vary depending on where you live. If an IRA is involved in a divorce situation, an estate attorney can explain how your state handles it.
This isn’t a loophole or a glitch. It’s just how these accounts are designed — they’re meant to pass quickly and directly to the named person, outside of the whole probate process that wills go through.
The big takeaway, especially if you’re someone who might inherit from a parent or grandparent someday: the single most important thing they can do is keep those beneficiary forms updated. Marriage, divorce, a new baby, someone passing away — any of those should trigger a review. A well-written will is basically useless for these accounts if the form underneath it still says someone else’s name.