Does a Final Will & Testament Have Precedence Over a 401(k)?

By Cindy DeRuyter, J.D.

Does a Final Will & Testament Have Precedence Over a 401(k)?

By Cindy DeRuyter, J.D.

It's a common misconception that a last will and testament controls the transfer of all your assets. In reality, certain assets, such as 401(k) accounts with one or more beneficiaries, pass independently from a will. When planning for estate administration and distribution, review all of your assets to ensure you include every type of asset and account.

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Understanding Probate vs. Nonprobate Assets

Your will controls probate assets regardless of whether your estate needs to go through probate court when you die. Generally, anything you own in your name individually without beneficiaries is a probate asset. This category also includes property and financial assets owned with others as tenants in common.

Nonprobate assets include anything owned with others as joint tenants with rights of survivorship, assets owned by a trust or a business, real estate with a life estate or transfer-on-death designation, bank accounts with payable-on-death registrations, and stocks, bonds, or mutual fund investments with transfer-on-death beneficiaries. Other common nonprobate assets include life insurance policies, annuity contracts, IRAs, Roth IRAs, 401(k)s, 403(b)s, and other retirement vehicles for which you named people or charitable organizations as beneficiaries.

Making It Simple for Beneficiaries

Naming one or more people or organizations as beneficiaries on 401(k) accounts and other nonprobate assets makes it relatively simple and fast for those beneficiaries to obtain the assets after you die.

Even if a probate proceeding is necessary to transfer title to other estate assets, accounts with beneficiaries are exempt from probate. This means that beneficiaries work directly with the financial institution holding the assets to receive their shares of the account. Every financial institution has its own forms and processes. However, obtaining 401(k) assets as a beneficiary after the account owner's death is often as simple as providing a certified copy of the death certificate and filling out claims paperwork. Law requires the financial institution to distribute assets within a certain time period after receiving all required information. The time period depends on the type of asset and state law.

The process is often more difficult for probate assets. When probate is necessary, the personal representative for the estate works through the court system to get legal authority over estate assets. After getting such authority, the personal representative administers the estate and distributes assets to the beneficiaries named in the will. This process is often time-consuming, and it can take months or even years before the estate is ready to distribute assets.

The Estate Exception

Assets with beneficiaries are generally nonprobate assets, but there is one notable exception. If you name your estate as the beneficiary on your 401(k) or other retirement account, the assets will go through your last will and testament, potentially making them subject to probate administration.

Creating your estate plan, both probate and nonprobate assets, is a step most people should take for their families. You have options, including working with an estate planning attorney in your state. Remember to review and update beneficiary designations and your last will and testament periodically, especially after experiencing major life events.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.