ASK THE LAWYER: Your beneficiary designations are probably wrong

Here’s a question I ask every new client: when was the last time you looked at the beneficiary form on your life insurance?

The usual answer is a long pause followed by something like “when I started the job.”

That’s a problem. Because beneficiary designations override your will. Every time.

Your will can say everything goes to your current spouse. Doesn’t matter. If your ex-wife is still named on that 401(k) beneficiary form from 2009, she gets the money. Missouri courts have been clear on this. The beneficiary form controls. End of discussion.

This trips up more families than any other estate planning issue I see.

It happens after divorce. It happens after remarriage. It happens when a named beneficiary dies and nobody updates the form. It happens when parents name a minor child directly, not realizing that a life insurance company won’t write a check to a 12-year-old — so now a court-supervised conservatorship controls that money until the child turns 18, at which point they get every dime with no strings attached.

The accounts that carry beneficiary designations include life insurance policies, 401(k) and 403(b) retirement plans, IRAs, annuities, payable-on-death bank accounts, and transfer-on-death brokerage accounts. For most families, these accounts represent the majority of their wealth. More than the house. More than the cars. More than whatever’s in the checking account.

And none of it is controlled by your will.

The fix is straightforward but requires attention. Pull every beneficiary form you have. Compare them against your current wishes. If you have a trust, the trust should probably be the beneficiary on most accounts — that way the money flows into the structure you’ve built instead of bypassing it entirely.

A few specific things to check: Are any ex-spouses still named? Are any minor children named directly instead of through a trust? Is there a contingent beneficiary listed, or does the form just say “estate” as the backup? Naming your estate as beneficiary on a retirement account can trigger immediate income tax on the full balance — a completely avoidable disaster.

I tell clients to review their beneficiary designations every time something changes. Marriage, divorce, birth of a child, death in the family. And even if nothing changes, review them every two years anyway, because memory is unreliable and the stakes are too high to guess.

This is a 30-minute project that protects your family from a mess that no amount of money can undo after the fact.

Patrick Nolan is a Missouri Estate Planning attorney and legal historian based in Kirksville. He writes on law, history, and constitutional issues, illustrating how they affect everyday life. He is the author of Dead Man’s Guide to Estate Planning and can be found online at https://www.nemolegal.com. Questions for the Ask a Lawyer Column may be submitted to ask@nemolegal.com.

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