Trusts and Estates

Do Retirement Benefits Go Through Probate?

If you want to keep your retirement accounts out of probate, check your beneficiary designations.
By Jennie Lin, Attorney · Harvard Law School
Updated: Jun 15th, 2022
Why Trust Us?
Why Trust Us?

An experienced team of legal writers and editors researches, drafts, edits, and updates the articles in the Understand Your Issue section of Lawyers.com. Each contributor has either a law degree or independently established legal credentials. Learn more about us.

If you die with funds remaining in your retirement accounts—like a pension, IRA, or a 401k—those funds usually pass directly to the beneficiaries you named on the accounts. So if you're wondering whether pensions or other retirement accounts are subject to probate, the answer is usually no. But complications can occur, and if you don’t keep your beneficiary designations up-to-date, those accounts could end up in probate court, or worse.



Name Beneficiaries to Avoid Probate

Normally, when you establish a retirement account, you also name beneficiaries who will receive any funds remaining in the account when you die. Those funds are not subject to probate; they go directly from the company holding the funds to the beneficiary. The beneficiary simply makes a claim, and the company makes a payment or a series of payments to that person—no courts involved.

If you don’t name a beneficiary, or if your beneficiaries have passed away, the funds will go into your probate estate (the category of property you own at your death that's subject to probate proceedings). The probate process will cause delays, additional expenses, and limit payout options.

So if you haven’t named beneficiaries for your retirement account—or if you can’t remember—contact your account administrator. Naming a beneficiary is usually just a matter of filling out a simple form, and you can often do it online.

Tips for Keeping Your Retirement Account Out of Probate Court

When naming beneficiaries, here are five tips to head off trouble down the road:

  1. Name your spouse. If you're married and live in a community property state, half of the money that you earn during marriage belongs to your spouse. This means that half of the money you add to your retirement account during your marriage actually belongs to your spouse. So if you don’t name your spouse as a beneficiary, your spouse could claim part of the account after you die. Among other issues, this legal complication could cause your retirement account to end up in probate court. To avoid this, name your spouse as beneficiary or have your spouse sign a waiver agreeing not to make a claim to it. Further, in all states, 401(k) plans require you to name your spouse as beneficiary (or get a waiver). So when in doubt, name your spouseor get help from an attorney or CPA. Notably, spouse beneficiaries also have more options when it comes to inheriting retirement accounts than other beneficiaries; for example, spouse beneficiaries can choose to roll over your account into their own.
  2. Name alternates. When you name a beneficiary for your account, you can usually name alternates who would take the property if the first beneficiary is not available to receive them. Naming alternates is almost always a good idea. If you don’t, and your first beneficiary is not available to receive the funds when you die, the funds in the account will be paid to your estate and distributed through probate.
  3. Name a person, not your estate or trust. Don’t be tempted to name your estate as the beneficiary. Some people like this idea because they think that they can make a more complicated distribution through their will or because they like the idea of naming all beneficiaries in one place. However, money that’s distributed through your estate will go through probate—and this is likely to mean that there will be less money left for your beneficiaries, it will take longer for them to get it, and they will have fewer options about how to receive it. Similarly, if you have a living trust, you generally should not name the trust as the beneficiary of your retirement benefits. Probate won’t be an issue, but if you name your trust as the beneficiary, the final beneficiaries may lose some of the funds, as well as some flexibility to use those funds. If you want to name a trust for the purpose of controlling the funds over time (perhaps for a beneficiary who might blow it all at once), see a lawyer for help.
  4. Make arrangements for minor beneficiaries. Minors can't receive funds from your retirement account outright. Someone will need to manage the account for your young beneficiaries until they become adults. You can set up this kind of property management when you open your account, or you can add it later. Most people use the Uniform Transfer to Minors Act (UTMA) to name a custodian for the account until the minor becomes an adult. The UTMA is simple and familiar to most financial institutions. To set up an UTMA custodianship for your young beneficiaries, ask your account administrator for help. If you want to set up property management that is more complicated or long-lasting—like a special needs trust, child’s trust, or spendthrift trustask an estate planning attorney for help. If you leave your retirement accounts to minor beneficiaries without setting up property management, the court may have to step in to do it for you.
  5. Keep your beneficiary designations up-to-date. You can change your named beneficiaries anytime. So as your wishes or circumstances change, contact your account administrator to update beneficiary information. This could be especially important if beneficiaries die or if you get married, have children, or get divorced. If a named beneficiary dies first and then you die, it will be as if you had no beneficiary namedand your account funds will likely end up in probate. Perhaps even worse, if you die with your former spouse as your named beneficiary, your ex-spouse might have a claim to those retirement funds, even if you haven’t spoken in years or if you’ve remarried. To avoid undesired outcomes, review your retirement accounts annually or at least as major life events occur to make sure that the right beneficiaries are on record.

Why and How to Avoid Probate

Probate is the court procedure of settling your estate when you die. Probate proceedings involve inventorying your property, paying any creditor claims, and then distributing your property to your inheritors. Probate can take months or years to complete, and between court fees, lawyer’s fees, and executor’s fees, it can cost the estate a lot of money—leaving less for beneficiaries. Probate can be useful for some estates, especially those with complicated holdings, a lot of debt, or subject to a lot of conflict. But for most simple estates, probate is often a waste of time and money. (See Why You Should Avoid Probate.)

To avoid probate, you can plan to have your property pass in ways not subject to the probate process. For example, property that transfers through these estate planning tools usually avoid probate:

  • Living trusts
  • Life insurance
  • Beneficiary designations (retirement accounts, bank accounts, and stock and bonds fall under this category)
  • Joint tenancy, tenancy by the entirety, and community property with the right of survivorship
  • Transfer-on-death (TOD) deeds (also called beneficiary deeds)—available in some states
  • Transfer-on-death (TOD) vehicle registration—available in some states

(See Top 7 Ways to Avoid Probate.) With these tools, property transfers directly to the beneficiary, and the court gets involved only if there's a problem—like if all of the named beneficiaries have died or if the estate does not have enough money to cover debts and expenses. If problems cause these “non-probate assets” to end up in probate, they become part of the probate estate, and they will be subject to the same fees and waits as any other probate property.

A Lawyer Can Help

If you're interested in planning your finances and making arrangements for your property to avoid probate, contact an experienced estate planning attorney for advice. (See What Can an Estate Planning Attorney Do for You?)

About the Author

Jennie Lin Attorney · Harvard Law School

Jennie Lin is a former legal editor in estate planning at Nolo. She wrote for Nolo.com and other sites in the Nolo Network and edited a variety of Nolo books. 

Get Professional Help

Find a Wills lawyer
Practice Area:
Zip Code:
How It Works
  1. Briefly tell us about your case
  2. Provide your contact information
  3. Connect with local attorneys
NEED PROFESSIONAL HELP?

Talk to an attorney

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you