Most people assume their will controls what happens to their assets when they die. It doesn't — at least not for the accounts that tend to hold the most money. Retirement accounts, life insurance policies, annuities, and many bank and investment accounts pass to whoever is named on the beneficiary designation form. That designation is a legal contract. It overrides the will. It overrides a divorce decree. It overrides what your family believes you intended. The form wins. Understanding this hierarchy — and knowing where your designations currently stand — is one of the most important things a
A will is what lawyers call a "residuary" document. It governs assets titled solely in your name that have no other transfer mechanism attached. That's a smaller category than most people realize. Retirement accounts — IRAs, 401(k)s, 403(b)s — are governed by a separate legal framework. Employer-sponsored plans like 401(k)s fall under a federal law called the Employee Retirement Income Security Act of 1974, or ERISA. Under ERISA, the plan administrator is legally required to pay the person named on the beneficiary form, period. A will, a trust document, or even a state court divorce order cannot override it. Individual accounts like IRAs are governed by the custodial agreement — the contract you signed when you opened the account. Same result: the designation form controls, not the will. Life insurance and annuities work the same way. The proceeds are paid by the insurance company directly to the named beneficiary. They never enter the probate estate unless the estate itself is named as beneficiary. The Supreme Court addressed this directly in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan (2009). William Kennedy's ex-wife had signed a divorce decree waiving her rights to his retirement account. He never filed a new beneficiary form. When he died, the Supreme Court ruled the ex-wife was entitled to the full $400,000 balance — because ERISA requires following the plan documents, and the designation form named her. The divorce decree was irrelevant.
Account / Asset Governing Passes by Default If No Type Law Designation? Designation 401(k) / 403(b) ERISA (federal) Yes Varies by plan; often spouse or estate Traditional IRA Custodial Yes Estate (triggers agreement probate) Roth IRA Custodial Yes Estate (triggers agreement probate) Life insurance Insurance Yes Estate contract Annuity Insurance Yes Estate contract Bank account with State banking Yes — via POD Estate (triggers POD law designation probate) Brokerage account Uniform TOD Act Yes — via TOD Estate (triggers with TOD (most states) designation probate) Real estate State property No — goes Probate per will or (solely owned) law through intestacy will/probate Source: ERISA §1001 et seq.; Kennedy v. DuPont Savings (2009); Trust & Will; Vanguard — What Is a Beneficiary?
The Estate Planning Gap Report walks through which accounts in a
ERISA §1001 et seq.; Kennedy v. DuPont Savings (2009); Trust &