Your retirement account does not pass through your will. It passes to whoever is on a form you probably filled in years ago and have not read since.
The mistake that a will cannot fix
Retirement accounts and life insurance policies do not pass through your will. They pass by beneficiary designation — the form you filled in when you opened the account, possibly a decade ago, possibly naming a parent or a former partner.
That designation wins. A will saying otherwise does not change it. Courts have repeatedly upheld outdated beneficiary forms against the obvious intentions of the deceased, because the contract is the contract.
The five minutes it takes to update a beneficiary form is the highest-value estate planning most people will ever do.
What to check, today
- Every 401(k) and old employer plan you still hold.
- Every IRA.
- Life insurance, including any policy through work.
- HSAs — the tax treatment for a spouse versus anyone else differs sharply.
- Bank and brokerage accounts with payable-on-death or transfer-on-death designations.
- Annuities and pensions.
Name a contingent beneficiary as well as a primary. If your only named beneficiary dies before you, the asset can fall back into probate, which is exactly what the designation exists to avoid.
When to revisit
Marriage, divorce, a birth, a death, and any job change that leaves an account behind. Divorce is the classic failure: in many states divorce does not automatically remove an ex-spouse from every designation, and people discover this at the worst possible moment.
What a will is actually for
A will directs everything without a designation — property, vehicles, possessions, bank accounts with no POD instruction. And it does two things nothing else does:
- Names guardians for minor children. For parents this is the single most important document they can sign, and it has nothing to do with money.
- Names an executor, the person who will actually carry it out.
Die without one and state law decides both, through a process that is slower, more public and more expensive than the alternative.
Two more matter as much and are often skipped. A durable power of attorney lets someone manage your finances if you cannot. A healthcare proxy or advance directive names who makes medical decisions and states your wishes. Without them, families go to court during a crisis to obtain authority that a signed page would have granted.
Do you need a trust?
Most people do not. A revocable living trust avoids probate, keeps affairs private and can control how and when heirs receive money — useful for property in several states, for complex families, or for leaving money to someone who should not receive a lump sum at eighteen.
It costs more to set up and requires you to actually retitle assets into it, which is the step people skip, leaving an expensive empty trust. For a straightforward estate, a will plus correct beneficiary designations does most of the work.
The list your family will need
Not a legal document, and often the most useful thing you leave: a written record of what exists and where. Accounts and institutions, insurance policies, the location of the will and deeds, and how to reach your attorney or accountant.
Do not put passwords in it. Use a password manager with an emergency access feature, and tell one trusted person the manager exists.
The realistic minimum
- Update every beneficiary designation. Free, today.
- Write a will, naming guardians if you have children.
- Sign a durable power of attorney and a healthcare directive.
- Leave a location list for your family.
- Revisit after any major life change.
This is general information, not legal advice. Estate law is state-specific and an attorney is worth it for anything beyond the simplest situation.