Ashley here. Practice manager at Tannery Company, and someone who sees what falls through the cracks when clients come through our door.
One of the first things we do when a new client comes in is look at the full picture: their documents, their accounts, their designations. And a lot of the time, we find something in the beneficiary section that doesn’t match the life they’re living today.
The Will Doesn’t Cover Everything
Here’s what most people don’t know, and what I always want to double check when someone tells me their estate is “handled”: beneficiary designations override your will.
This is not the exception to the rule, it is the rule.
If your IRA names your ex-spouse, that’s who gets it. Doesn’t matter what the will says or how long you’ve been divorced. If you had another child since the beneficiaries were chosen, they’re out of luck. If your life insurance policy names someone who’s no longer alive, the money may end up in your estate instead of with your family, sitting in probate for months, taxed in ways you worked to prevent.
The will you paid an attorney to write does not touch these accounts.
Bad news: this is an unfortunately common estate planning mistake I see. Good news: it’s also one of the most fixable.
The Patterns I Keep Seeing
After years of watching this play out, the scenarios start to feel familiar. They tend to fall into two buckets: the accounts were never set up quite right to begin with, or life changed and the paperwork didn’t keep up.
When the setup was never quite right:
Naming individuals when there’s a trust.
A client who did real estate planning work, set up a trust, and felt confident in what they were doing. But when it came time for paperwork, they left their IRA naming their adult children individually as beneficiaries instead of the trust. The provisions they’d built so carefully by creating the trust were null and void.
Naming the estate.
An account where “estate” is listed as the beneficiary has surprising implications. This usually happens because either no beneficiary was named, or the original one passed away with no contingent in place. When there is a specific name listed, the heir can typically take up to ten years to draw down an inherited retirement account, which spreads the income tax over time. But when “estate” is the listed beneficiary instead, the window compresses and the tax hits faster.
When life changes and the paperwork doesn’t:
A divorce.
A client who went through a divorce a decade ago and thought they had updated everything: the will, the trust, the account titled in their name. But they forgot about an old IRA from a previous job, and it still lists their ex. In most states, divorce doesn’t automatically update beneficiary designations. You have to do it yourself. (A few states have revocation-on-divorce statutes, but verification is always the right move, not assumption.)
A death.
A client who listed a parent as the primary beneficiary on a 401(k). The parent passed away years later, and no contingent was ever named. When the account owner died, the funds passed to the estate instead of going directly to the kids. A year in probate. A tax outcome that didn’t need to happen.
The Part Nobody’s Watching
Here’s what actually happens when the designation is wrong: your family finds out at the worst possible moment. Sometimes it’s the wrong person receiving the money because the form still says what it said when you opened the account. Sometimes it’s a tax bill that didn’t need to be that large, or an estate stuck in probate for months when it didn’t have to be. By then, you’re not there to explain what you intended or fix what the form says. The consequences land on the people you were trying to protect.
What makes this so easy to miss is the nature of how beneficiary forms are set up. You fill one out when you open the account, and then it’s done. There’s rarely a trigger to look at it again. Your estate attorney doesn’t see it. Your financial advisor may not either. The form lives at the custodian level, separate from everything else you’ve built.
That separation is the problem. A designation that seems fine on its own can create real damage when it doesn’t fit with your tax plan or your estate documents. At Tannery Company, we look at both the form and everything around it. When they don’t line up, we catch it while there’s still time to fix it.
What a 30-Minute Review Actually Looks Like
You don’t need a formal meeting to start this. Grab your laptop and favorite beverage, then pull up each of the following:
- IRAs (traditional and Roth, every account, every custodian)
- 401(k) or 403(b), including accounts from previous employers you haven’t rolled over
- Life insurance policies, both personal and through an employer
- Annuities
- Key-person or company-owned policies, if you have a business
For each one, you’re checking whether the right person is named, whether that person is still alive, whether the relationship still makes sense, and whether a contingent beneficiary is in place. If you have a trust, you’re also checking whether the designation reflects it.
We put together a simple one-page checklist to walk you through it. Download the Beneficiary Review Checklist.
If the answers are yes across the board, you’re ahead of most people we work with. Congrats.
If You Find Something
If you haven’t looked at your designations in more than two years, or since a major life change like a marriage, divorce, new child, business transaction, or the loss of a parent, the 30 minutes are worth it.
And if you run the audit and something comes up that you’re not sure how to handle, reach out. It’s usually something we can handle with a single conversation and a form update.
