Are Your Beneficiary Designations Protected?

In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), spousal consent is typically required to name a non-spouse beneficiary on retirement accounts funded with community property. For ERISA plans like 401k, federal law requires spousal consent regardless of state.

In most states, no. The Supreme Court ruled in Clark v. Rameker (2014) that inherited IRAs are not protected in bankruptcy. However, about 8 states (Alaska, Arizona, Florida, Idaho, Missouri, North Carolina, Ohio, Texas) have passed laws explicitly protecting inherited IRAs from creditors in state court judgments.

All 50 states have "slayer statutes" that prevent someone who intentionally kills another person from inheriting from their victim. This applies to wills, trusts, life insurance, and beneficiary designations. The killer is treated as having predeceased the victim.

Per stirpes is not the default for beneficiary designations in any state. If a beneficiary dies first and no contingent beneficiary is named, the proceeds typically go to the estate (and through probate). "Per stirpes" must be explicitly designated, or contingent beneficiaries named. Naming a revocable trust as contingent beneficiary is one way to keep those assets out of probate. SimplyTrust sets up a revocable trust online that can be named on designations.

ERISA-governed plans (most employer 401k and pension plans) are subject to federal law, not state law. State divorce revocation statutes do not apply to ERISA plans — beneficiaries on these plans require manual updates after divorce. ERISA also requires spousal consent to name a non-spouse primary beneficiary.

A contingent beneficiary is a backup — they receive the asset only if the primary beneficiary cannot (for example, if the primary beneficiary dies before or at the same time as the account owner). Life insurance policies, retirement accounts (IRA, 401(k)), and bank accounts with beneficiary designations typically allow both primary and contingent beneficiaries. If the primary is living at the owner's death, the contingent receives nothing. If the primary is deceased, the contingent steps into that role. Naming a contingent prevents assets from defaulting to the estate (and probate) when a primary predeceases you.