Your Will Doesn’t Control Your 401(k). This Form Does.

I’ve been a CPA since 1981, and I spent more than a decade advising clients at major Wall Street firms. In all that time I’ve watched people spend months getting a will exactly right — the attorney, the witnesses, the signatures, the safe deposit box — and then never spend five minutes on the single piece of paper that actually decides where most of their money goes.

Here’s what almost no one is told at the signing table. Your will governs the assets that pass through probate: the house, the car, the checking account, the furniture — the things with no name attached to them. It does not govern your 401(k), your IRA, your life insurance, or any account carrying a transfer-on-death instruction. Those pass by beneficiary designation, a form you filled out the week you were hired, or the day you opened the account, or in the paperwork when you rolled something over. By the time most people retire, that second category is the larger half of the estate.

Whoever is named on that form takes the money. Not as a loophole or a technicality — as settled federal law, affirmed twice by the Supreme Court. And the families it has cost were not careless people. They simply assumed the will covered everything.

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Two ex-wives, two unchanged forms, two opposite answers

In 1994, a Boeing employee named David Egelhoff divorced his wife Donna. He died a little over two months later, having never changed the beneficiary forms on his employer life insurance policy or his company pension. Washington State had a law on the books that automatically cancels an ex-spouse’s designation the moment a divorce is final, so his two children from an earlier marriage sued for the money. In 2001 the Supreme Court ruled against them. Donna — the ex-wife — kept it.

Now take Mark Sveen. He bought a life insurance policy in 1998 naming his then-wife, Kaye Melin, and listing his two children as backups. They divorced in 2007. He died in 2011 with the form untouched, exactly as Egelhoff had. Minnesota had passed its own revocation-on-divorce law in the meantime.

In 2018 the Supreme Court held that the Minnesota law applied. This time the children got the money and the ex-wife got nothing.

Same situation. Same neglected form. Opposite outcomes. The only thing that differed was what kind of account the money was sitting in.

Egelhoff’s life insurance and pension came through his employer, which put them under ERISA — the federal law governing workplace retirement and benefit plans. ERISA overrides state beneficiary rules, so Washington’s law simply didn’t reach them. Sveen’s policy was one he bought himself. No employer, no ERISA, so Minnesota’s law governed it normally.

Roughly half the states now have a revocation-on-divorce statute. They can reach individually purchased life insurance, individual IRAs, and in many states payable-on-death bank and brokerage accounts. They cannot reach your 401(k), your company pension, or your group life coverage at work. Which means the same divorce, on the same afternoon, can wipe your ex-spouse off one account and leave them sitting on the next one down the list — and nothing on either statement tells you which is which.

You cannot sort this out by reading your statements. A fiduciary advisor can inventory every account you hold, find out whose name is actually on each form, and tell you where state law is quietly helping you and where nothing but a fresh signature will do. Get matched with up to three fiduciary advisors, free →

A divorce decree doesn’t fix it either

This is the part that catches people who thought they’d handled it.

William Kennedy worked for DuPont and had roughly $400,000 in the company savings plan with his wife Liv named as beneficiary. When they divorced in 1994, the decree expressly stripped her of any interest in that plan. She signed it. He never filed a new beneficiary form. When he died, DuPont paid Liv, and his daughter — serving as executrix of his estate — sued.

In 2009 a unanimous Supreme Court sided with the plan. A plan administrator’s legal duty, the Court said, is to follow the plan documents. The beneficiary form is a plan document. A divorce decree sitting in a county courthouse is not. The administrator did its job, and it did not have to go looking for a waiver it had never been sent.

There’s a second chapter the popular version of this story usually drops, and it matters. The Court deliberately left open whether an estate can turn around and sue the ex-spouse after the money has been paid out, to enforce the waiver she signed. Several federal appeals courts have since allowed exactly that. But it is a second lawsuit, filed years later, against someone who already has the money and may well have spent it — and at least one court has held it isn’t available at all when the estate is leaning on a state revocation statute rather than a signed waiver.

Which is the whole point. The cheap version of this fix costs one signature. The expensive version costs a decade and a law firm.

Not sure whether a decree, a waiver, or a form is governing a particular account? That’s precisely the question to put to a fiduciary — you can get matched here in a few minutes.

5 places an outdated form is probably still sitting

The 401(k) at the job you left. If you never rolled it over, it’s still there, still holding whatever you wrote on your first day. People can change employers multiple times, up to 12 in some cases, over a career and leave a trail of these behind.

Life insurance through work. Usually filled out during onboarding, alongside the parking pass, and almost never revisited.

The IRA you rolled over. A rollover does not carry the old designation across. You signed a new form at the new custodian, and if you left it blank, the custodian’s default terms decided for you.

Bank and brokerage accounts with a payable-on-death instruction. Easy to add, easy to forget, and they sit entirely outside the will.

The health savings account. Most people treat an HSA as a spending account and never think of it as an inheritance. It has its own beneficiary form, and for anyone other than a spouse, an inherited HSA generally stops being an HSA — the full value becomes taxable income to whoever receives it, in that single year.

This is a tax problem, not a paperwork problem

The name on the form doesn’t just decide who gets the money. It decides how much of it survives the transfer, and the difference is not small.

A surviving spouse who inherits an IRA can generally treat it as her own and keep it growing. Almost anyone else is on a 10-year clock — and if you die on or after the date your required withdrawals have begun, your heirs must also take a distribution every year along the way, not simply empty the account in year 10. Required withdrawals now start at 73. Naming your estate rather than a person can be the most expensive choice on the list, because an estate isn’t treated as a designated beneficiary at all.

Then there’s the spousal consent trap. If you’re married and want to leave your 401(k) to anyone other than your spouse — a child from a first marriage, most commonly — federal law requires your spouse’s written consent, witnessed by a notary or a plan representative. Here’s the part that surprises people, including some attorneys: a prenuptial agreement does not accomplish this. You weren’t a spouse when you signed it, so you had nothing to waive. A postnuptial waiver, properly executed after the wedding, can. IRAs carry no such federal requirement — though in the nine community property states, your spouse may have a claim regardless.

Every one of these levers pulls on the others: which account, which beneficiary, which state, which tax year. Vanguard studied the value a good advisor adds and called it “Advisor’s Alpha” — the return that comes not from picking investments but from getting exactly this kind of disciplined, tax-aware decision right. A fiduciary is legally required to put your interests first, and the right one will inventory your actual accounts instead of selling you a product.

The bottom line

Updating a beneficiary form is the cheapest fix in all of estate planning. It costs a signature. It takes 10 minutes per account. And it overrides a will that cost you thousands of dollars to draft.

The families who get this right aren’t more organized than everyone else. They simply sat down once with someone who asked to see every account — the old 401(k), the work life insurance, the rolled-over IRA, the payable-on-death savings account — and checked the name on each one. That’s the entire discipline.

What makes it urgent isn’t a deadline. It’s that the form gets read exactly once, and you won’t be in the room to explain what you meant. Everything else in your financial life can be corrected later. This one can’t.

Once the forms are right, your will still has real work to do — the house, personal property, who raises a minor child or grandchild in your care, and everything the forms don’t touch. Trust & Will lets you put a will in place in about an hour for $199, or a trust starting at $499, which is what the two documents together are actually for: The will handles the estate, the forms handle the accounts, and neither one covers for the other.

If you have $100,000 or more in retirement savings, the highest-return hour you’ll spend this year is having a fiduciary pull up every account and read you the name on each form. The match is free, the first appointment is almost always free, and you’re under no obligation to act on anything you hear.

This article is general information, not legal or tax advice for your situation. Beneficiary and revocation rules vary by state and by plan type; confirm your own with a qualified professional.

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