The Form That Overrides Your Will
In May, I did something for every family I work with. I pulled up the current beneficiary designations on every account I had a record of. Traditional and Roth IRAs. Active 401(k) and 403(b) plans. Old 401(k) accounts still sitting at previous employers. HSAs. Individual accounts with transfer-on-death designations.
Then I sent every family a one-page email that said, in plain language, "Here is what your accounts currently say about who gets them. Please read this carefully."
That email had the highest response rate of any client email I sent this year. For some families, everything was already clean. For others, we found gaps that we addressed in the next week. The most common response was some version of, "I had no idea, I hadn't looked at this since 2019."
Beneficiary designations are one of the most underrated areas of financial planning for busy working families. They are also one of the most consequential. So this article is the technical walkthrough I wish more people had access to before they ran into a problem.
The single most important fact
Your beneficiary designation on a retirement account or a life insurance policy overrides your Will.
If your Will says your assets go to your current spouse, but your 401(k) at a previous employer still lists your ex-spouse as the primary beneficiary, the 401(k) goes to your ex-spouse. The Will doesn't fix it. The lawyer doesn't fix it. The executor doesn't fix it. The custodian sends the money to whoever is on the form.
This is the single most common source of an estate disaster I see. Someone meticulously updates their Will after a remarriage or a divorce. They never touch the beneficiary forms on their retirement accounts and life insurance. Years later, the wrong person inherits a meaningful piece of the family's net worth, and the executor of the estate has no legal authority to redirect it.
The most common gaps
The patterns repeat across families. Here are the five I see most often.
A deceased parent is still listed as the primary beneficiary on a Roth IRA opened in the account holder's twenties. The parent passed away years ago. The form was never updated because there was no reason to log in to the account.
No contingent beneficiary is listed. If the primary beneficiary predeceases the account owner, the asset falls to the estate. For a retirement account, that usually means probate and meaningfully worse tax treatment than nearly any other distribution path.
401(k) at a previous employer has a completely different beneficiary structure than the current 401(k). When people leave a job, the old 401(k) often sits where it is. The original beneficiary designation reflects who the person was at the time they were hired, which may have been a decade ago, before marriage, before children, before a parent's death.
HSA has no beneficiary on file. The form was either never completed or got lost in the original onboarding paperwork. The account defaults to the estate, which, as we'll see, is the worst possible outcome for an HSA.
An ex-spouse is still listed as the primary beneficiary on a retirement account from a previous employer. The divorce was finalized years ago. The QDRO was handled. The beneficiary update for the old 401(k) was missed because no one was actively managing the account.
ERISA spousal consent on 401(k) plans
If your retirement account is a 401(k), 403(b), or other ERISA-governed employer plan, and you are married, federal law makes your spouse the automatic primary beneficiary. You can name someone else, but to do so, you need notarized written spousal consent.
This affects blended families and second marriages regularly. A person fills out a 401(k) beneficiary form, intending to leave the account to children from a first marriage. They don't know about the spousal consent requirement. They submit the form. The plan administrator processes it, but if there's no notarized spousal consent on file, the designation is unenforceable, and at death, the spouse receives the account anyway.
IRAs are different. ERISA does not govern IRAs. State law does. You can name whoever you want as the primary beneficiary, and your spouse has no automatic federal claim, though community property states add their own wrinkles. Many people don't realize that their 401(k) and IRA have different beneficiary rules. They assume both work like a Will. Neither does.
The HSA tax bomb
If you leave an HSA to your spouse, the account transfers tax-free and remains a fully tax-advantaged HSA in their name. The spousal rollover is unique and unusually generous.
If you leave an HSA to a non-spouse, the day you die, the account stops being an HSA. The entire fair market value becomes ordinary income to the beneficiary in the year of your death. There is no ten-year window. There is no stretch. It is recognized in one year.
If you have spent twenty years funding an HSA as a long-term retirement asset and you have $150,000 in it, leaving it to your adult child can produce a $40,000 to $50,000 federal tax bill in a single year, depending on their bracket. There is a one-year window where the non-spouse beneficiary can offset some of the taxable income by paying the decedent's unpaid medical expenses out of the account, but most beneficiaries do not know that rule and miss the deadline.
Naming the estate as the HSA beneficiary is worse than naming a non-spouse, because the estate cannot use the one-year medical expense offset. For a married couple where both spouses are alive and healthy, the spouse should almost always be the primary HSA beneficiary.
SECURE Act 2.0 and the ten-year rule, now fully in force
If you are an account owner who has passed your required beginning date for distributions, which is currently age 73, and your beneficiary is a non-eligible designated beneficiary, the SECURE Act 2.0 ten-year rule is now fully enforced.
Non-eligible designated beneficiaries cover most adult children. The eligible designated beneficiaries who can still stretch over their lifetime are surviving spouses, minor children of the account owner until they reach the age of majority, at which point the ten-year clock starts, disabled or chronically ill individuals, and beneficiaries who are not more than ten years younger than the account owner.
For most adult children who inherit a parent's IRA in 2026 or later, the rules now read as follows: The inherited account must be fully emptied by the end of the tenth year after the date of death. If the account owner had already started required minimum distributions, the adult child must also take annual RMDs in years one through nine, and then fully deplete the account by the end of year ten. The old planning, where a child could spread distributions across their lifetime, is largely unavailable now.
This changes the math for senior-professional families with significant retirement balances and high-earning adult children. A two-million-dollar traditional IRA distributed to a child earning two hundred thousand a year produces meaningful additional ordinary income in each of the next ten years, much of it likely landing in the top federal brackets. The math on Roth conversions during the account owner's lifetime gets stronger. The math on charitable beneficiaries gets more interesting. The math on which child is named on which account becomes a real planning conversation, not a default.
Per stirpes versus per capita
On most beneficiary forms, there is a small box, often easy to miss, asking whether you want the designation to apply per stirpes or per capita. Many people skip it.
The difference matters. Say you name three children as equal primary beneficiaries. One of them passes away before you, leaving two grandchildren. If you elected per stirpes, that child's one-third share passes to her two children, and the grandchildren each receive one-sixth of the account. If you elected per capita, that one-third share is redistributed equally among your two surviving children, and the grandchildren receive nothing from this account.
For most senior-professional families with multiple children, per stirpes reflects what they actually want. The form often either leaves the box blank or defaults to per capita. This is a one-second selection that can completely change how a meaningful asset is distributed.
Why this should be a calendar item, not a triggered event
Most people, when asked when they would update beneficiaries, say something like, "when something changes." A marriage. A divorce. A birth. A death.
The problem with that mental model is that the events that should trigger a beneficiary update are precisely the ones when families have no bandwidth to handle paperwork. A death in the family is not the time to log in to a former employer's 401(k) portal to update a contingent designation. A new marriage is not the time to read the fine print on per stirpes versus per capita.
So the practical solution is to make the beneficiary review a calendar item that runs on a fixed annual cadence, separate from life events. Once a year, on a date that doesn't change, someone pulls the current designations for every account in the household and reads them aloud. If the family works with a planner, the planner should be doing this. If they don't, a recurring calendar reminder on the household calendar will do.
This is the work that doesn't show up in a portfolio statement and doesn't get measured in basis points. It is also, in twenty years of being an advisor, one of the highest-leverage things I do for the families I work with on the estate side.
The closing thought
Morgan Housel once wrote that doing well with money has a little to do with how smart you are and a lot to do with how you behave. The piece of behavior we underrate is the boring kind. Reading a one-page form once a year. Confirming that the people who would receive your accounts at your death are still the people you intend.
Money is a number. Enough is a story. The behavior that has saved my families the most money on the estate side is not a market decision. It's a paperwork decision. Make sure you're writing your own.
Disclaimer: This article discusses general planning concepts and is not specific tax, legal, or financial advice. Beneficiary, ERISA, and tax rules can change and have state-specific nuances. Consult your own qualified advisor before acting.