Why Your Will May Not Control Every Asset — and the Form You Should Review

You may have taken the time to draft a will, carefully choosing who should receive your money and property. You may even have consulted an attorney to make sure everything was properly arranged.

Still, your will may not control some of your most valuable assets.

Life insurance policies, 401(k) retirement plans, individual retirement accounts (IRAs), and annuities usually go to the beneficiaries listed on those accounts.

That means a form filled out years ago — sometimes decades ago — can decide who gets thousands of dollars, no matter what the will says.

If that form was never updated, the money could end up with someone you no longer meant to benefit.

A Supreme Court case shows how this can happen

A well-known example came in a 2009 U.S. Supreme Court ruling involving a DuPont employee, 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, and as part of the divorce settlement, Liv gave up her rights to the retirement benefits.

But Kennedy never changed the beneficiary form for that account.

When he died in 2001, about $400,000 was still in the plan.

His daughter, who was handling his estate, argued that the money should go to the estate because Liv had waived her rights in the divorce.

The plan administrator disagreed and paid the funds to Liv because her name was still listed 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 correctly followed the plan documents.

The divorce agreement did not replace the beneficiary designation in the way the plan required.

Kennedy did update a separate pension plan to name his daughter, but he did not make the same change to the savings plan at the center of the case.

The case is a reminder that changing one retirement account does not automatically change another.

Why a will may not control certain accounts

Many people assume a will decides who receives property after death.

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

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

A retirement account usually passes according to its beneficiary designation, subject to federal and state law as well as the plan’s rules.

Bank accounts with payable-on-death designations and investment accounts with transfer-on-death instructions can function in a similar way.

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

A valid beneficiary designation generally cannot be overridden by a will.

For instance, if someone names a sibling as the beneficiary of a life insurance policy but later writes a will leaving everything to a spouse, the sibling may still receive the insurance money unless the beneficiary form is properly changed.

That is why estate planning requires more than writing a will.

401(k)s and IRAs do not always follow the same rules

There is another distinction many married couples may not realize.

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

To name someone else, the spouse usually must give written consent, witnessed by a notary or plan representative.

IRAs are different.

They are generally not subject to the same federal spousal-beneficiary requirements. Account owners usually have more flexibility in naming beneficiaries, though state marital-property laws and account agreements can create additional limits.

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

Knowing the difference is especially important for second marriages or families with children from earlier relationships.

What happens after divorce in Virginia?

Virginia law adds another layer of protection that can affect beneficiary designations after divorce.

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

This can apply to life insurance, annuities, retirement plans, and other death benefits.

But there are important exceptions. Federal law can override state law, and divorce decrees or written agreements may preserve certain beneficiary rights.

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

That matters because federal rules for some employer-sponsored retirement plans can supersede state provisions.

The safest step is not to assume divorce changes every beneficiary designation on its own.

Instead, review each account and file updated forms directly with the proper financial institution or plan administrator.

Do not forget the contingent beneficiary

Another detail that is often overlooked is the contingent beneficiary.

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

A contingent beneficiary is the backup if the primary beneficiary cannot receive the money, such as when that person dies first.

For example, a husband may name his wife as the primary beneficiary of a retirement account but never name a contingent beneficiary.

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

In some situations, the money may pass to the estate and require probate. In others, default rules may send it to other relatives.

Choosing a contingent beneficiary can reduce confusion and make the result more certain.

It is also worth checking whether beneficiaries are supposed to receive equal shares or different percentages.

Five things to review before it is too late

Reviewing beneficiaries does not always mean overhauling an entire estate plan. For many people, it starts with gathering account statements and checking the names on file.

Begin with these steps:

1. Review every account. Look at 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 match your wishes.
3. Check contingent beneficiaries. See who would receive the money if the 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 all reasons to revisit your designations.
5. Get confirmation. Submit changes using the institution’s required process and verify that the updated designations were accepted.

For more complicated estates, blended families, or accounts tied to trusts, an estate-planning attorney or financial professional can help make sure beneficiary choices fit the rest of the plan.

A simple task that can prevent bigger problems

People often spend a great deal of time preparing a will, but pay little attention to beneficiary forms completed when they first started a job or bought an insurance policy.

You may have signed those forms when your 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 to receive your savings.

Yet the designation may still be on file.

The lesson from the DuPont case is straightforward: what someone intended and what the official account documents say are not always the same thing.

A few minutes spent reviewing beneficiary forms now could prevent confusion, legal disputes, and financial strain for loved ones later.

Your will matters. But making sure your beneficiary forms match it can matter just as much.