401k Beneficiaries vs Will Beneficiaries: Which Document Wins?

It’s very common for a 401(k) to be someone’s largest financial asset. As a result, 401(k) account owners should understand how certain estate planning actions or inactions can affect the distribution of their 401(k) account balance when they pass away.

When you set up your 401(k) account, you are asked to select one or more beneficiaries - who will receive the money in the account when you pass away. It’s important to note that when you pass away, your 401(k) account will be payable to the beneficiaries you designated, regardless of the provisions that are in your last will and testament.

Your last will and testament controls where your “probate assets” go when you die. In general, the things that you own individually, in your own name, and without beneficiaries are probate assets. Your 401(k) is a “non-probate asset.” Non-probate assets can be claimed by beneficiaries without court and attorney involvement.

Estate planning involves continually assessing what you have and what is most important to you, and then developing and maintaining a set of legal documents and instructions so that protections are in place for yourself and your loved ones. Understanding the distinctions between 401(k) beneficiaries and Will beneficiaries is an important component of planning your estate.