Life Insurance, Retirement Accounts, and Beneficiary Designations

Because they're not governed by it. Life insurance policies and retirement accounts (401(k)s, IRAs, pensions) pass directly to whoever's named on file with the insurer or plan administrator. This is actually a feature, not a flaw — it's how these assets skip probate and reach people quickly. The catch is that the form only works correctly if it's actually current.

With no beneficiary named, the money typically ends up going through probate as part of your estate, or follows a default order set by the plan or insurer — neither of which may be what you'd actually choose. With an outdated beneficiary — an ex-spouse, someone who's passed away, a sibling you're no longer close with — the form generally still controls, even if it clearly doesn't reflect your current wishes.

Sometimes, but not reliably enough to count on. More than half the states automatically revoke an ex-spouse's beneficiary status on something like a personally-purchased life insurance policy after a divorce. But federal law governs employer-sponsored retirement plans and employer-provided life insurance, and it overrides those state laws entirely — the U.S. Supreme Court has confirmed this more than once. In one case, a man divorced, never updated his employer-provided life insurance and retirement plan forms, and died a little over a year later. His ex-wife received the full payout — $496,000 in life insurance and $50,000 in retirement funds — and his minor children received nothing, because the accounts were tied to his employer. The only reliable fix is updating the paperwork yourself, directly with the plan administrator or insurer.

Your primary beneficiary is first in line. Your contingent beneficiary is the backup, in case your primary beneficiary doesn't survive you. Skipping the contingent beneficiary isn't a big deal until the day it is — without one, a primary beneficiary's early death can send the account right back into probate.

Generally, no — or at least not without a plan for what happens next. A minor typically can't directly manage inherited funds, so the money often ends up in a court-supervised account until they turn 18, at which point they receive full, unrestricted control, with no strings attached. Naming a trust for their benefit, rather than the child directly, is usually the better path — worth a specific conversation with your attorney about the right structure.

Sometimes yes, sometimes no — and for retirement accounts specifically, this has real tax consequences. Inherited retirement accounts come with their own rules about how quickly the money has to be withdrawn, and naming a trust as beneficiary adds another layer of rules on top of that. This is genuine tax-and-legal territory, not a default setting — worth a specific conversation with your attorney or financial advisor rather than guessing.

Retirement accounts go under Assets > Cash, Stocks & Retirement — institution, account type, and current beneficiary. Life insurance goes under Assets > Other Assets & Liabilities > Insurance, with Life as the policy type — carrier and policy number, plus your agent's contact information and who's currently named as beneficiary.