Beneficiaries, TOD and POD

The story: Walt’s old form

Neighbor Ruth asks Walt about an old IRA beneficiary form, and Walt learns it still names a former spouse even though the new will leaves everything to Walt’s wife, Rosa.

1. Narrator: Walt remarried a few years ago. The new will leaves everything to Walt’s wife, Rosa.
2. Ruth: Did you update your IRA beneficiary form too?
3. Walt: The will covers everything, doesn’t it?
4. Narrator: No. The IRA goes to whoever is named on its form. Walt’s form, filled out years ago, still names a former spouse.
5. Narrator: Walt updates every form: Rosa first, with Walt’s children as backups.
6. Walt: So my beneficiary forms are my real will for most accounts.

What you’ll learn

1. Forms beat your will

   Retirement accounts and life insurance go to the person named on the beneficiary form, whatever your will says. An old form can send money to a former spouse.

2. Spouses, workplace plans and backups

   In most 401(k)s and pensions, your spouse is the beneficiary unless they sign a written waiver, usually notarized. Always name backup (contingent) beneficiaries too, in case the first one dies before you.

3. POD and TOD skip probate

   Payable-on-death (bank accounts) and transfer-on-death (brokerage accounts, and real estate in many states) let an account pass straight to the person named, without probate court.

4. Joint owners and review times

   Adding a child as a joint owner has risks: their debts, gift rules and lost tax benefits. Review every form after a marriage, divorce, birth or death.

Key words

contingent beneficiary

the backup if your first choice dies before you

POD / TOD

payable on death (bank accounts) or transfer on death (brokerage accounts, some real estate)

probate

the court process for settling an estate under a will or state law

per stirpes

if a beneficiary dies first, their share passes down to their children

Common questions

Can I name a minor grandchild?

You can, but a child can’t manage money directly, so a court may need to step in. Many people use a trust or a custodian instead. The trusts lesson explains how.

Does a TOD deed work in my state?

Many states allow transfer-on-death deeds for a home, but not all. Check your state’s rules or ask a local attorney or legal aid.

Remember this

Your beneficiary forms are your real will for most accounts.

Try it: Check every beneficiary

1. List each account that has a beneficiary form: IRAs, workplace plans, life insurance, bank and brokerage accounts.
2. Check who is named, including a backup.
3. Write the names on your money map, and update any form that’s out of date.

No account: use the public Net Worth Calculator (/tools/net-worth-calculator), or list each account and who is named on one sheet of paper.

Live facts

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

• Spouse rights in workplace retirement plans

  Source: DOL.gov (EBSA)(opens in a new tab)