When families sit down to create a will, they naturally assume it controls all their assets. That assumption is understandable, but it misses one of the most consequential rules in estate planning. For assets with a named beneficiary on file, that beneficiary designation controls who receives the asset, not the will.
What a Beneficiary Designation Actually Is
A beneficiary designation is a form filed directly with a financial institution or insurance company that names who will receive the asset when the owner dies. Retirement accounts (IRAs, 401(k)s, 403(b)s), life insurance policies, annuities, and payable-on-death (POD) or transfer-on-death (TOD) accounts all use this mechanism.
These designations create a contract between the account owner and the institution. When the owner dies, the institution follows the designation on file. It does not look at the will, and it does not check with the probate court.
Why the Designation Wins
Under Massachusetts law, non-probate transfers operate independently of the probate process. The will governs probate assets (property titled in the decedent’s individual name without a beneficiary designation or survivorship feature). But assets with valid beneficiary designations pass outside of probate entirely.
The legal logic is that the beneficiary designation is a separate contractual arrangement. The will speaks to the probate court, and the designation speaks to the financial institution. They operate in parallel, and when they conflict, the beneficiary designation prevails for the assets it covers.
A Common Scenario That Creates Problems
Consider a family where a parent updates their will after a divorce, leaving everything to their children. The will is clear. But the parent’s 401(k) and life insurance policy still name the former spouse as primary beneficiary. Those forms were filled out years ago during open enrollment and never revisited.
Massachusetts law provides an important safeguard here. Under MGL c. 190B, section 2-804, a divorce automatically revokes many revocable transfers to a former spouse, including most beneficiary designations on life insurance and non-ERISA accounts. For those assets, the designation is treated as though the former spouse predeceased the account owner, and the proceeds pass to the contingent beneficiary or the estate.
However, this statutory revocation does not reach every account. ERISA-governed employer retirement plans, such as a 401(k), are subject to federal preemption. The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that governs employee-sponsored health plans and retirement accounts. The U.S. Supreme Court held that ERISA preempts state revocation-upon-divorce statutes for covered plans. That means the 401(k) plan administrator will follow the beneficiary designation on file, even if it still names the former spouse.
Section 2-804 provides meaningful protection for many nonprobate transfers, but it is not universal. Families should still update every beneficiary designation after a divorce, particularly on employer-sponsored retirement plans where federal preemption applies.
Assets That Follow Beneficiary Designations
Not every asset uses a beneficiary designation. Knowing which ones do is critical for coordinated planning.
Controlled by beneficiary designation
Controlled by the will (probate assets)
Controlled by trust terms (if properly funded): Assets retitled into a revocable trust during life
Each category follows its own transfer mechanism. A comprehensive estate plan coordinates all three.
How to Keep Designations Current
Beneficiary designations should be reviewed as part of every estate plan update. They should also be reviewed after any major life event: marriage, divorce, the birth of a child, or the death of a named beneficiary.
This review is mechanical, but it is one of the most impactful steps a family can take. A single outdated form can redirect hundreds of thousands of dollars away from the intended recipients.
Planning Ahead
The relationship between a will and beneficiary designations is one of the most misunderstood aspects of estate planning. Families who take the time to review and coordinate both can avoid unintended outcomes that are difficult or impossible to fix after a death.
At RackiLaw, beneficiary designation review is a standard part of every estate planning engagement. If it has been a while since designations were last checked, or if a major life change has occurred, scheduling a review is a practical next step.