A single form buried in an employer’s HR portal can override years of estate planning. When a 401(k) account holder dies, the retirement plan’s beneficiary designation, not a will, determines who receives the money. The U.S. Supreme Court settled this question definitively, and recent IRS guidance reinforces it. Yet many account holders still assume their will controls everything they own, creating a gap that can send six-figure balances to ex-spouses, estranged relatives, or unintended recipients.
How ERISA’s plan-document rule overrides a will
The federal law governing most employer-sponsored retirement plans is the Employee Retirement Income Security Act. Under Section 1104, plan fiduciaries must administer benefits in accordance with written plan documents. Those documents include the beneficiary designation form on file with the plan administrator. A will drafted by an estate attorney carries no weight against that form, no matter how recently it was signed.
The Supreme Court addressed this head-on in Kennedy v. Plan Administrator, 555 U.S. 285 (2009). In that case, a participant’s ex-wife remained the named beneficiary on his employer plan despite a divorce decree in which she waived her interest. The Court held that the plan administrator was required to pay benefits to the person listed on the form, regardless of the waiver. The ruling made clear that ERISA’s plan-document rule controls distribution, and outside agreements do not alter the administrator’s obligation.
Twelve years earlier, the Court reached a related conclusion in Boggs v. Boggs, 520 U.S. 833 (1997), holding that a state-law attempt to transfer interests in undistributed ERISA pension benefits through a will was preempted by federal law. Together, these two decisions establish a firm boundary: wills and state probate rules generally cannot reroute ERISA-governed retirement benefits. If the plan document and its beneficiary records point in one direction and the will points in another, the plan wins.
IRS guidance confirms who counts as a designated beneficiary
Tax rules now mirror this emphasis on plan paperwork. In Internal Revenue Bulletin 2024-33, the IRS explains that an interest passing to someone under a will or by operation of state law does not make that person a beneficiary designated under the plan unless there is an actual plan designation. For required minimum distribution purposes, a “designated beneficiary” must be named on the retirement plan’s own records.
That distinction has practical consequences. A child who inherits a 401(k) solely because a will pours “everything” into a trust may not qualify as a designated beneficiary if the account lists no individual on the plan form. In that case, the account may be treated as having no designated beneficiary, which can accelerate the payout period and compress the tax hit. By contrast, a person specifically named on the beneficiary form generally receives the more favorable treatment Congress intended for individual heirs.
The Employee Benefits Security Administration underscores the same theme in its public materials: ERISA plans are administered according to written terms, and fiduciaries must follow those terms consistently. For participants, that means the IRS and the Department of Labor are aligned-what counts is the official designation on file, not informal understandings or even carefully drafted wills.
Common traps: divorce, second marriages, and outdated forms
The most frequent mismatch between plan documents and estate plans arises after divorce. Someone may sign a property settlement, update their will, and even change life insurance beneficiaries, yet forget to update the 401(k) form. Under the Supreme Court’s reasoning in Kennedy, the ex-spouse can still receive the plan balance if their name remains on file. Similar problems surface with second marriages, where an account owner assumes a new spouse will inherit but never submits a new designation.
Another trap involves default rules in the plan itself. Some plans automatically send benefits to a surviving spouse if no beneficiary is listed, while others pay to the estate. Participants who intend to leave funds to children or a trust must override those defaults in writing. Relying on a will alone leaves the outcome to plan terms the participant may never have read.
Practical steps to align your retirement accounts and your will
Preventing these conflicts starts with an inventory. Participants should log into each retirement plan or contact the administrator and confirm who is listed as primary and contingent beneficiary. If the records are outdated, submit a new form and keep a copy with other estate documents. Spouses in community property states should also review any plan-specific spousal consent requirements before naming someone else as primary beneficiary.
Because tax rules and distribution options can be complex, many people benefit from working with both an estate attorney and a tax professional. The IRS offers tools for individuals to research account-related issues through its online account system, and plan sponsors can obtain technical support using the agency’s business services portal. Advisors who focus on retirement and estate questions can also consult IRS resources tailored to practitioners on the tax professional platform.
The core message is simple but easy to overlook: for employer plans governed by ERISA, the beneficiary form is the controlling document. Wills, divorce decrees, and family expectations cannot fix a misdirected designation after death. Regularly reviewing and updating those forms is one of the most effective, and most neglected, estate-planning steps for anyone with a significant retirement balance.
