The Form That Overrules Your Will
I’m not an attorney or a financial advisor, and this isn’t legal advice. Beneficiary rules vary by state and by the type of account, and they turn on details specific to you. Use this to build a checklist and a question list — then take both to a professional.
David Egelhoff did what a lot of people do. When he was married, he named his wife, Donna, as the beneficiary on his life insurance and pension through work. Then they divorced. He never changed the form.
Two months after the divorce, he died.
His children argued the money should come to them, and they had a state law on their side: Washington, where they lived, automatically revoked a beneficiary designation to a former spouse on divorce. The case went all the way to the Supreme Court. In 2001, in Egelhoff v. Egelhoff, the Court ruled for the ex-wife. Because the plan came through his employer, federal law — ERISA — overrode the state statute. The form won.
That case is the whole article in one paragraph. But the details are where families get hurt, so let’s go through them.
The will doesn’t control as much as you think
Most people picture their estate as one pile of money, and the will as the instructions for dividing it.
That isn’t how it works. A large share of what most people over 55 own never goes through the will at all. It passes directly to whoever is named on the account — by contract, outside probate, regardless of what your will says:
- IRAs, 401(k)s, 403(b)s and other retirement accounts
- Life insurance and most annuities
- Bank accounts with a payable-on-death (POD) designation
- Brokerage accounts with a transfer-on-death (TOD) designation
- In many states, real estate or vehicles with a transfer-on-death deed or title
Your will governs what’s left over — whatever is titled in your name alone, with no beneficiary and no co-owner. For a lot of families, that’s the smaller pile.
So if your will says “everything to my three children equally” and your IRA form still says “my wife, Carol” from a marriage that ended in 2004 — Carol may be getting the IRA.
Your will can’t fix it. A letter can’t fix it. Only the form fixes the form.
“But the divorce decree said she gave it up.”
That was the argument in a second Supreme Court case, eight years later.
William Kennedy named his wife, Liv, on his retirement savings plan at DuPont. They divorced, and the divorce decree said Liv was giving up her interest in that plan. He never changed the beneficiary form. When he died, the plan paid Liv.
His daughter sued. In 2009, in Kennedy v. Plan Administrator for DuPont, the Supreme Court ruled unanimously that the plan administrator was right to pay the person on the form. Plans are allowed to pay according to their own documents — and the decree didn’t change the document.
Some states do help. Many have “revocation-on-divorce” laws that automatically cancel an ex-spouse’s designation, and in 2018, in Sveen v. Melin, the Supreme Court upheld Minnesota’s version for a private life-insurance policy. But as Egelhoff showed, those laws generally don’t reach plans you get through an employer. And whether one applies to you depends on your state and the account.
The only reliable revocation is a new form.
The five mistakes that show up most
1. The ex is still on it. The one we’ve covered. If you’ve been divorced, check every account. Not most of them. Every one.
2. There’s no backup. You named your spouse, and nobody after. If your spouse dies first, or you die together, the account may default to your estate — which means probate, delay, and possibly a less favorable tax schedule for your heirs. Every account should have a contingent beneficiary.
3. You named “my estate.” Sometimes people do this on purpose, thinking the will can sort it out. It drags an asset that could have skipped probate straight into it, exposes it to creditors of the estate, and for retirement accounts can shorten how long your heirs have to take the money out.
4. You named a minor child. Insurance companies and account custodians generally won’t hand money directly to a child. A court may have to appoint someone to manage it — which costs money, takes time, and may not be the person you’d have picked. The usual fixes are naming a custodian under your state’s Uniform Transfers to Minors Act, or a trust. That’s a conversation for an attorney.
5. You named one child “to share with the others.” It’s an act of trust, and it’s a mistake. Legally, that money belongs to the child you named. They have no obligation to share, their creditors or divorcing spouse may be able to reach it, and if they do share, it can count as a gift from them. Name each person directly.
Two details worth knowing
Per stirpes. If you’ve named your three children equally and one of them dies before you, where does that third go — to the two survivors, or to your late child’s kids? On many forms there’s a box or a phrase, per stirpes, that sends it down that child’s line. If you’d want your grandchildren to receive their parent’s share, look for it.
Your spouse may have to sign. In most 401(k) and similar employer plans, a spouse is generally the default beneficiary, and naming anyone else requires the spouse’s written, witnessed consent. If you’re remarried and you intended the 401(k) for children from a first marriage, don’t assume a form you signed alone did the job.
Why the ten-year rule makes this worth an afternoon
For most people who inherit a retirement account after 2019, the IRS requires the entire balance to come out within ten years. There are exceptions — a surviving spouse, a minor child, someone disabled or chronically ill, or someone not more than ten years younger than you.
That means the beneficiary form isn’t just deciding who. It’s shaping how much tax they’ll pay and how fast. That’s a conversation worth having with a tax professional — and it starts with knowing what your forms currently say.
The assignment
This is a one-afternoon job, and it’s one of the highest-value afternoons you’ll spend this year.
- List every account that could have a beneficiary: each IRA, each 401(k) or 403(b), each life insurance policy (including the one through work), annuities, bank accounts, brokerage accounts.
- Log in or call, and look at the actual form. Don’t go from memory. Screenshot or print the beneficiary page.
- Check four things on each: Is the primary right? Is there a contingent? Is anyone on it a minor? Is the estate named anywhere?
- Fix anything wrong on the institution’s own form. Your will can’t fix it. A letter can’t fix it. A note in the drawer can’t fix it.
- Ask for written confirmation of every change, and keep it.
- Put the printouts in the same folder as your will and the documents from “The House Is the Hard Part” — one place your family can find.
- Set the trigger. Marriage, divorce, a death, a birth. Any of those, you pull the folder out again.
David Egelhoff almost certainly didn’t mean for his ex-wife to receive that money. William Kennedy’s divorce decree said in plain words that she wouldn’t. It didn’t matter. What mattered was a form that took five minutes to fill out and nobody looked at again.
Look at yours this week.
Go be bold!
Tell me what you found. When you pull your forms this week, reply and tell me what you found — no names or numbers, just “all good” or “I had a surprise.” I’d bet more of you have a surprise than you’d guess.
Sources
- Egelhoff v. Egelhoff, 532 U.S. 141 (2001) — Cornell LII — ERISA overrode Washington’s revocation-on-divorce law; the ex-wife was paid
- Kennedy v. Plan Administrator for DuPont (2009) — Cornell LII — unanimous; the plan pays the person on the form despite the divorce decree
- Sveen v. Melin (2018) — Justia — Minnesota’s revocation-on-divorce law upheld for a private life-insurance policy
- IRS — Retirement plan and IRA RMD FAQs — the 10-year rule and its exceptions
