A few years ago, a new client came to our Manhattan office, relieved to have finally signed her new will. She had meticulously planned to leave her entire estate to her two children from her first marriage. Her largest single asset was a seven-figure life insurance policy. When we asked to see the policy’s beneficiary designation form, her face fell. She had forgotten to change it after her divorce a decade earlier. Her ex-husband was still listed as the sole beneficiary.
Her will was clear. Her intentions were clear. But had she passed away that day, her ex-husband—not her children—would have received the entirety of that policy. This is not a rare oversight; it is one of the most common and devastating errors I see in my practice.
Many intelligent, successful people assume their last will and testament is the final word on their assets. It is not. Certain assets pass to your heirs by contract, not by will. These are often called “non-probate” assets, and they include life insurance policies, retirement accounts like 401(k)s and IRAs, and certain bank or brokerage accounts with “Payable on Death” (POD) or “Transfer on Death” (TOD) instructions. The beneficiary form you signed for these accounts—perhaps years ago—is a binding contract that supersedes whatever your will says.
The Law That Protects—And Its Limits
When you get divorced in New York, the law provides certain automatic protections. Specifically, Estates, Powers and Trusts Law (EPTL) § 5-1.4 states that a divorce automatically revokes any disposition or appointment of property made to your former spouse in your will. If your will leaves your house to your spouse and you later divorce, the law effectively reads your ex-spouse out of that document. It’s a sensible safeguard.
Here is the critical exception: the statute does not automatically revoke beneficiary designations on non-probate assets like life insurance or retirement plans. The law presumes you will handle those separately. The courts see that beneficiary form as a distinct contract between you and the financial institution. Your will can say one thing, but the contract will say another—and the contract almost always wins.
The result is a legal trap that can divert significant wealth away from your intended heirs and into the hands of a former spouse. Stewardship of your legacy demands that you treat these forms with the same gravity as your will. They are not minor administrative paperwork; they are powerful estate planning instruments in their own right.
The Problem with Naming Minors Directly
Another common misstep I see is naming a minor child as the direct beneficiary of a large account. While the intention is noble, the execution creates a significant legal and administrative burden for your family. A minor cannot legally own and manage a substantial inheritance directly.
If a minor is set to inherit more than a nominal amount, a court proceeding is required. The Surrogate’s Court will have to appoint a legal guardian of the property for the child. This is not necessarily the same person who is the guardian of the child’s person—the parent or relative they live with. This process takes time, incurs legal fees, and places the funds under court supervision until the child turns 18.
Worse, upon turning 18, the child receives the entire inheritance outright, with no restrictions or guidance. An 18-year-old, no matter how mature, is rarely equipped to responsibly manage a sudden, life-changing sum of money. A more prudent approach involves using a trust—either a testamentary trust created in your will or a standalone living trust—to hold and manage the funds for the child’s benefit. You can appoint a trustee to manage the assets and dictate how and when the funds are distributed, perhaps staggering payments at ages 25, 30, and 35, long after the follies of youth have passed.
An Act of Intentional Stewardship
Your estate plan is a set of instructions for the future. For those instructions to be followed, they must be consistent. A will that directs assets to your children is undermined by a 401(k) beneficiary form that still names your ex-spouse. The work is in the details.
This is why we always advise clients to name both primary and contingent beneficiaries. A primary beneficiary is your first choice. A contingent—or secondary—beneficiary is your backup. What if your primary beneficiary passes away before you do, or at the same time? Without a named contingent beneficiary, the asset may be forced back into your probate estate, defeating the purpose of the designation and subjecting it to delays and creditors.
Reviewing these forms isn’t a one-time task. It should be done after any major life event: a marriage, a divorce, the birth of a child, or a death in the family. It is a fundamental part of being a good custodian of what you have built.
The first step toward ensuring your assets are aligned with your intentions is to conduct an audit. Gather the most recent statements from your life insurance policies, retirement accounts, and any other accounts with named beneficiaries. Once you have them in hand, schedule a meeting with our firm to review these designations and ensure every one matches the legacy you plan to leave.
