Beneficiary Designations vs. Your Will in Pennsylvania

A beneficiary designation overrides your will. Every time. This is the single most common mistake we see in Pennsylvania estate plans — a carefully drafted will undone by a 30-year-old beneficiary form sitting in a 401(k) provider's system.

How the rule works

Assets that pass by beneficiary designation — life insurance, IRAs, 401(k)s, 403(b)s, annuities, TOD brokerage accounts, POD bank accounts — are non-probate assets. They go directly to the named beneficiary by contract, regardless of what your will says.

If your will leaves "everything to my spouse" but your 401(k) still lists your sister from before you got married, your 401(k) goes to your sister.

Where this goes wrong

• Stale designations after divorce. Pennsylvania law (20 Pa.C.S. § 6111.2) revokes designations of a former spouse on most non-probate transfers — but plan administrators governed by ERISA (most 401(k)s) follow federal law, which does not automatically revoke. Update the form.
• No contingent beneficiary. If the named beneficiary predeceases you and no contingent is named, the asset typically defaults to the estate — pulling it back into probate at the worst possible moment.
• Naming "my estate" as beneficiary. This forces an IRA into probate and eliminates the beneficiary's ability to stretch distributions over their own lifetime. Almost never the right move.
• Conflict with trust planning. If you set up a revocable trust to avoid probate but never updated your beneficiary forms, the trust does not own those assets and cannot control them.

The audit

For every estate planning engagement, we ask clients to pull every beneficiary form they can find and either confirm it's current or correct it:

• Employer 401(k) / 403(b)
• Rollover IRAs and Roth IRAs
• Pension survivor election
• Group and individual life insurance
• Annuities
• POD bank accounts and TOD brokerage accounts

This audit usually finds at least one stale designation.

Pennsylvania inheritance tax interaction

Beneficiary designations don't avoid the Pennsylvania inheritance tax. A 401(k) passing to a sibling by beneficiary designation still owes 12%. Probate avoidance is one issue; tax planning is another.

See also how to avoid probate.