Your Will May Not Decide Who Gets Your Money: One Overlooked Form Could Change Everything

You spent time preparing a will, carefully deciding who should inherit your money and property. You may even have worked with an attorney to make sure everything was in order.

But your will may not control something: some of your most valuable financial assets.

Life insurance policies, 401(k) retirement plans, individual retirement accounts (IRAs), and annuities generally pass to the beneficiaries named directly on those accounts.

That means a form completed years or even decades ago could determine who receives thousands of dollars, regardless of what your will says.

And if you have forgotten to update that form, the money might go to someone you no longer intended to benefit.

A Supreme Court Case Shows What Can Go Wrong

One of the clearest examples came in a 2009 U.S. Supreme Court decision involving a DuPont employee named William Kennedy.

Kennedy had named his wife, Liv, as the beneficiary of his employer-sponsored savings and investment plan in 1974.

The couple divorced in 1994. As part of their divorce agreement, Liv gave up her rights to the retirement benefits.

But Kennedy never changed the beneficiary designation on that particular account.

When he died in 2001, approximately $400,000 remained in the plan.

His daughter, serving as executor of his estate, argued that the money should go to the estate because Liv had waived her rights during the divorce.

The plan administrator disagreed and paid the money to Liv, whose name remained on the beneficiary form.

The dispute eventually reached the Supreme Court.

In Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, the justices unanimously ruled in January 2009 that the administrator had properly followed the plan’s documents.

The divorce agreement did not change the beneficiary designation as required by the plan.

Kennedy even updated the beneficiary on a separate pension plan to name his daughter, but he did not change the designation on the savings plan at the center of the lawsuit.

The case illustrates a costly mistake: Updating one retirement account does not automatically update another.

Why Your Will Doesn’t Always Control

Most people think of a will as the document that determines who receives their property after death.

That is true for many assets that become part of an estate, but certain financial accounts operate differently.

A life insurance policy typically pays its death benefit to the named beneficiary.

A retirement account generally transfers according to its beneficiary designation, subject to applicable federal and state laws and plan rules.

Bank accounts with payable-on-death beneficiaries and investment accounts with transfer-on-death designations can work similarly.

These assets often transfer directly to the named recipient without going through probate.

A will generally cannot override a valid beneficiary designation.

For example, suppose someone names a sibling as the beneficiary of a life insurance policy but later writes a will leaving everything to a spouse.

Unless the policy’s beneficiary designation is properly changed, the sibling may still receive the insurance proceeds.

That’s why estate planning requires more than simply writing a will.

A 401(k) and an IRA Can Follow Different Rules

There is another important distinction that many married couples may not realize.

Under federal law and the rules governing most employer-sponsored 401(k) plans, a surviving spouse is generally entitled to the account if the participant dies before receiving the benefits.

Naming someone else usually requires the spouse’s written consent, witnessed by a notary or plan representative.

An IRA is different.

IRAs generally are not subject to the same federal spousal-beneficiary requirements. Account owners typically have more flexibility when naming beneficiaries, although state marital-property laws and account agreements can impose additional restrictions.

That means a married person may have two retirement accounts with substantially different beneficiary rules.

Understanding those differences matters especially for couples entering second marriages or families with children from previous relationships.

What Happens After a Divorce in Virginia?

Virginia has an additional legal protection that may affect beneficiary designations after divorce.

Under Virginia Code § 20-111.1, divorce generally revokes certain existing, revocable beneficiary designations naming a former spouse.

The law can apply to life insurance, annuities, retirement arrangements, and other death benefits.

However, there are significant exceptions. Federal law may take precedence, and divorce decrees or written agreements can preserve particular beneficiary rights.

Virginia law itself warns that a former spouse’s beneficiary designation may or may not be automatically revoked after divorce.

That distinction matters because federal rules governing certain employer-sponsored retirement plans can override state-law provisions.

The safest approach is not to assume divorce automatically changes every beneficiary.

Instead, review each account and submit updated documents directly to the appropriate financial institution or plan administrator.

Don’t Forget the Backup Beneficiary

Another commonly overlooked detail is the contingent beneficiary.

The primary beneficiary is the person or organization first in line to receive the account.

A contingent beneficiary serves as the backup if no primary beneficiary is eligible to receive the money, such as when the primary beneficiary dies first.

Suppose a husband names his wife as the primary beneficiary of a retirement account but never names a contingent beneficiary.

If both die, the destination of the retirement money will depend on the account’s governing documents and applicable law.

In some cases, the money may pass to the estate, which may require probate. Other accounts have default provisions naming additional relatives.

Naming a contingent beneficiary can help avoid confusion and provide greater certainty about where the money should go.

It is also important to review whether beneficiaries are designated to receive equal shares or different percentages.

Five Things to Check Before It’s Too Late

A beneficiary review does not necessarily require a complete overhaul of your estate plan. For many people, it begins with gathering account statements and checking the names on file.

Start with these steps:

1. Review every account. Check workplace retirement plans, IRAs, life insurance policies, annuities, and accounts with payable-on-death or transfer-on-death designations.
2. Confirm the primary beneficiaries. Make sure the people or organizations listed still reflect your wishes.
3. Check contingent beneficiaries. Review who would receive the money if your primary beneficiary could not.
4. Update after major life changes. Marriage, divorce, remarriage, the birth or adoption of a child, and the death of a loved one are important reasons to review your designations.
5. Get confirmation. Submit changes using the institution’s required procedures and verify that the updated designations have been accepted.

For complicated estates, blended families, or accounts involving trusts, an estate-planning attorney or financial professional can help ensure beneficiary choices work with the rest of the estate plan.

A Small Task That Could Prevent a Major Problem

People often put considerable effort into preparing a will but give little thought to beneficiary forms completed when they first started a job or purchased an insurance policy.

You may have signed those forms when life looked very different.

A spouse may have died. A marriage may have ended. Children may have been born. An old beneficiary may no longer be the person you want receiving your savings.

Yet the designation could still be on file.

The lesson from the Supreme Court’s DuPont case is simple: What someone intended and what the official account documents say are not always the same thing.

A little time spent reviewing beneficiary forms today could prevent confusion, legal disputes, and financial hardship for loved ones later.

Your will is important. But making sure your beneficiary designations agree with it can be just as important.