Does a will change named beneficiaries for life insurance policies, pensions, and similar accounts?

No. Each life insurance policy has a named beneficiary or beneficiaries. Bank accounts might have a pay-on-death instruction, and a pension plan like an IRA or a 401(k) usually has a designated beneficiary. The beneficiaries named in these policies and accounts have a legal right to the money when you die. Nothing you say in your will changes that.

For example, if you named your sister as the beneficiary of your life insurance policy before you had children, didn’t change that beneficiary designation with the insurance company after the children were born, but say in your will that you want the proceeds of your life insurance policy to be divided equally among your three children, your sister will get all the proceeds if you die, and your children will get nothing. If you set up a savings account at the bank as a pay-on-death account to be paid to your nephew, but say in your will that you want your money, most of which is in that savings account, to be divided equally between your cousin and the local animal shelter, your nephew will get the money in the account, and your cousin and the animal shelter will have to split whatever other money you had.

You do have a right to change beneficiaries during your life. In order to do this you have to fill out the appropriate form with the entities where the policies and accounts are located. You need to deal directly with the insurance company, the bank, and the sponsor of your pension plan if you want to change the beneficiaries.

See our article on How To Change a Beneficiary on a Life Insurance Policy for more information.

Case Studies: Insurance and Legal Decisions

Case Study 1: Life Insurance and Changing Beneficiaries

Sarah purchased a life insurance policy early in her career and named her parents as the primary beneficiaries. Over the years, Sarah got married and had children. However, she never updated the beneficiary designation on her life insurance policy.

Unfortunately, Sarah passed away unexpectedly, and her parents received the entire life insurance payout. Her spouse and children were left financially unprepared, highlighting the importance of regularly reviewing and updating beneficiary designations to align with changing life circumstances.

Case Study 2: Pension Plan and Designated Beneficiary

Mark worked for a company for several years and accumulated a substantial pension plan, designating his brother as the beneficiary. However, Mark later got divorced and remarried, without updating his pension plan beneficiary. Unfortunately, Mark passed away before he had a chance to update the beneficiary designation.

As a result, his ex-spouse, not his current spouse, received the pension benefits. This case emphasizes the need to review and update beneficiary designations on retirement accounts to ensure that the intended beneficiaries receive the assets.

Case Study 3: Pay-on-Death Bank Account Instructions

Karen had a close relationship with her niece, Lisa, and wanted to leave her a significant portion of her assets. Karen set up a pay-on-death bank account and named Lisa as the beneficiary.

However, Karen also had other valuable assets, such as a house and a stock portfolio, which she did not properly address in her estate planning.

Unfortunately, Karen passed away without a will, and the laws of intestacy distributed her assets according to the legal heirs, not her intentions. As a result, Lisa did not receive the intended inheritance from Karen’s other assets, highlighting the importance of comprehensive estate planning beyond simple beneficiary designations.