Beneficiary Forms Beat Your Will

The story: The form nobody updated

Ana and Lee review account papers and find an old life insurance form that still names Ana’s former spouse.

1. Narrator: Ana married Lee two years ago and updated the will to leave everything to Lee.
2. Narrator: But the life insurance from Ana’s job still names Ana’s former spouse as the beneficiary.
3. Lee: The will says everything goes to me. Doesn’t the will win?
4. Narrator: No. The form beats the will. That payout could go to the former spouse.
5. Ana: Then I’m checking every form: retirement accounts, life insurance and the bank.
6. Narrator: Name a primary and a backup on each form, and check them after every big life change.

What you’ll learn

1. The form beats the will

   Retirement accounts, life insurance and many bank and investment accounts pass to the beneficiary named on the account’s form. Your will can’t change that. An old form can send money to someone you never meant to.

2. Primary and backup

   The primary beneficiary gets the money first. A contingent, or backup, beneficiary gets it if the primary has died. Without a backup, the money may end up going through probate or to your estate.

3. Don’t name a young child directly

   A child can’t manage an inheritance, so a court may appoint someone to do it. Many parents name a trust or a custodian for the child instead. Rules vary by state, so it’s a good question for an attorney.

4. POD, TOD and the yearly check

   Payable-on-death (POD) bank accounts and transfer-on-death (TOD) investment accounts skip probate. Married people may need a spouse’s consent to name someone else on a 401(k). Check every form each year and after a marriage, divorce, birth or death.

Key words

primary beneficiary

the person named to get an account first

contingent beneficiary

the backup who gets it if the primary has died

Also called: backup beneficiary

POD

payable on death: a bank account that passes straight to a named person

TOD

transfer on death: an investment account (or, in some states, a home) that passes straight to a named person

Common questions

How do I see who’s on my forms?

Log in to each account or call the plan, insurer or bank. Most let you view and change beneficiaries online.

Can I name more than one person?

Yes. Most forms let you split by percent, for both primary and backup beneficiaries.

Remember this

Check every beneficiary form after every big life change.

Try it: Check your beneficiary forms

1. List each retirement account, life policy and bank or investment account.
2. Look up the primary and backup beneficiary on each one.
3. Update any that are out of date, and note who is named.
4. Add “check beneficiaries” to your yearly money check-up list.

No account needed: list your accounts on paper, or use the free Net Worth Calculator.

Live facts

Numbers that change over time, with when they were last checked and where they come from.

• Beneficiary rules for retirement accounts

  Source: IRS.gov(opens in a new tab)

• Rules for minors and transfer-on-death deeds vary by state: find legal help

  Source: USA.gov(opens in a new tab)