Episode 71: Why That Retirement Account May Not Go Where You Think
Episode 71
Host: Jill Mastroianni
Why That Retirement Account May Not Go Where You Think
What happens if you don’t name a beneficiary on your retirement account? Most people assume it goes to the estate. But that assumption can be dangerously wrong. In this episode, Jill walks through a real case where getting this wrong would have cost a surviving spouse more than $300,000, and explains what actually controls the outcome in your estate planning.
What You’ll Learn in This Episode
Why retirement accounts don’t follow your estate planning documents. Retirement accounts are generally non-probate assets if beneficiary designations are used, meaning they pass outside of your Will and traditional estate planning structure. The beneficiary designation controls.
The estate planning mistake people (and professionals) make. Most people assume that if no beneficiary is named, the account automatically becomes part of your probate estate. In reality, the estate planning outcome depends on the plan agreement.
Why “that’s just how it works” can derail your estate plan. When it comes to estate planning, assumptions can be expensive. The better question is:“How do we know that?”
How intestate succession impacts your estate plan. If assets flow through your estate without a Will, state law controls distribution, often producing outcomes that don’t align with your intended estate planning goals.
What effective estate planning actually looks like. Estate planning isn’t just documents—it’s understanding what controls each asset, asking better questions, and verifying the details instead of relying on assumptions.
Resources & Links
Watch the podcast on YouTube: https://youtu.be/nzQsb2bo9JY
The Death Readiness Playbook (2nd Edition)
A practical tool to support your estate planning and organize what actually matters:
https://deathreadiness.com/playbook
Weekly Newsletter (Estate Planning Insights)
Get ongoing guidance and real-world estate planning examples:
https://deathreadiness.com/subscribe
Connect with Jill:
Website: DeathReadiness.com
Email: jill@deathreadiness.com
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What happens if you don’t name a beneficiary on your retirement account? Most people, and even some professionals, will tell you, “It just goes to your estate.” Today, I walk through a real case where that assumption would have cost a surviving spouse more than $300,000. And the answer is hidden in a document most people never read.
Welcome to The Death Readiness Podcast. This is not your dad’s estate planning podcast. I’m Jill Mastroianni — estate planning attorney, death readiness guide, and your translator for wills, trusts, probate, and the conversations most families avoid. If you’ve been wondering things like, ‘Can a trust protect what I leave to my children?’ ‘What happens if I give someone power of attorney over me?’ and ‘How can I help my parents while respecting their independence?’ You’re in the right place.
I vividly remember one particular trip to the movies when I was a kid. I don’t remember what we saw, but I remember what happened before and after.
Outside the movie theater, there was a group set up with puppies. And there was a sign that said if those puppies weren’t adopted that night, they would be gone the next morning. I’m sure it didn’t say “euthanized,” but I understood exactly what it meant.
When we came out of the movie, the puppies were still there. And now they were closer to that fate.
So on the drive home, sitting in the backseat next to my brother, I started crying. My parents asked what was wrong, and I told them about the puppies. I’m sure they had seen them, too, and were just hoping I hadn’t fully processed what was going on.
My mom, being a very quick thinker, told me she would call the movie theater when we got home and ask about the puppies. And she did. I could hear her side of the conversation:
“Hello, I’m calling about the puppies… Oh, they were all adopted? Okay, great. Thank you very much.”
And I believed her.
It wasn’t until much later that I realized she never actually called. The movie theater wasn’t on the other end of the line. She was trying to protect me… and avoid adopting four puppies that night.
I get that. I get that even more now as a mom.
But with age has come a little more skepticism.
Except when it comes to puppies—I still need a softer and kinder reality than actually exists.
I recently texted a friend that I was worried about all the dogs on Petfinder, and she wrote back, “Don’t worry. I checked. They’ve all been adopted.” That’s exactly what I needed to hear.
But today’s episode is about a situation in which a reassuring answer doesn’t work. You need proof.
Before we get into today’s episode, I want to give you a quick update on the second edition of The Death Readiness Playbook.
It officially went to the printer last week and will be ready in early April.
If there are parts of your own estate plan you’re not completely sure about, or things you’ve been meaning to double-check but haven’t, that’s exactly why I created this.
The Playbook gives you a place to organize your information, ask better questions, and understand what actually controls your plan.
You can reserve your printed copy at deathreadiness.com/playbook.
And if you’re an estate planning attorney, wealth advisor, funeral home director, or a related professional, I’m developing a co-branded option as well—copies of The Death Readiness Playbook with your branding that you can offer to your clients.
If you’d like to stay up to date on the Playbook and everything else I’m working on, you can sign up for my weekly email newsletter at deathreadiness.com/subscribe.
Today’s Tuesday Triage question comes from Diane, one of my relatives in New York.
Diane is very committed to her death readiness journey. She’s also a loyal listener of the podcast.
Every once in a while, she reaches a point where she needs some clarification and direction, and she emails me a question.
Her most recent question was this: “What happens if I don’t name a beneficiary on my retirement account?”
And I wanted to bring this question to Tuesday Triage because:
First, retirement accounts are something most people have.
And second, the answer is not intuitive and the consequences can be significant.
So before we get into the answer, let’s make sure we’re all starting from the same place.
A retirement account is exactly what it sounds like; it’s an account designed to help you save for the future, usually for the time when you’re no longer working. You might have a 401k or an IRA.
But what makes retirement accounts different from your regular bank or investment account is the tax treatment. Depending on the type of account, you either get a tax benefit when you put the money in, like with a 401(k) or a traditional IRA, or when you take the money out, like with a Roth IRA.
Now, from a Death Readiness perspective, retirement accounts have one really important feature: you get to name a beneficiary.
On my own retirement accounts, I’ve named my husband as the beneficiary. So if I die before he does, that account goes directly to him.
And this is really important: it doesn’t matter what my Will says. I could have a Will that says, “I don’t want my husband to get anything,” and it wouldn’t change the outcome. If he’s named as the beneficiary on that account, he gets it.
That’s because naming a beneficiary is a probate avoidance tool.
Probate assets pass under your Will. But assets with a beneficiary designation, like retirement accounts, are non-probate assets. They pass directly to the person you’ve named, outside of your Will entirely.
Now, if you’ve been listening to this podcast for a while, you might be thinking, “Okay… so why not just name your trust as the beneficiary?”
And the answer is—you can. But you probably shouldn’t in most situations.
Because for reasons I will never fully understand, the rules around how retirement accounts are distributed after death are incredibly complicated. And generally speaking, it’s often better to name an individual as the beneficiary.
Now, I’m going to be fully transparent with you—I don’t follow that advice perfectly myself.
If my husband doesn’t survive me, I’ve named my estate as the contingent beneficiary on my retirement account. And yes, I know, my estate is not an individual.
So let’s pause for a second and talk about what that actually means.
When I say I’ve named my estate, what I literally wrote on that beneficiary designation form is: “Estate of Jillian Mastroianni.”
So if Jeremy, my primary beneficiary, dies before me, and that IRA pays to my estate, what that really means is it’s going to flow into my probate estate.
And because I have a Will, that means it will be distributed according to the terms of my Will.
Now, here’s another important layer. I don’t specifically mention my IRA in my Will. I don’t say, “I give my IRA to this person or that person.” I just don’t address it.
And when that happens, the asset passes under what’s called the residuary clause.
This is the catch-all provision in your Will. It answers the question: “Where does everything else go?”
It basically says: anything I didn’t specifically give away, or anything that’s left over, goes to this person, or these people.
So in my case, that IRA would pass under my residuary clause, which creates two trusts, one for each of my children.
Now, I know I just told you I generally advise clients to not to name their estate as the beneficiary of a retirement account.
And that’s true. But I also know real life doesn’t always fit neatly into best practices.
For me, right now, naming the Estate of Jillian Mastroianni as the contingent beneficiary on my IRA is the right decision. Will I change it in the future? Probably.
It’s not perfect. But it’s fine. And sometimes, fine is good enough.
Now, if you’re listening and wondering “Wait… what are those complicated rules you just hinted at?”—I see you.
If there’s real interest, I can do a deeper dive on that in a future episode. My instinct is that it’s a little too detailed, and honestly, a little too painful, for an audio-only format. That might be better as a video where I can actually show you through the use of visual tools what’s going on.
Speaking of which, if you prefer to watch instead of just listen, these podcast episodes are now on YouTube.
It’s not a very glamorous setup. Just me, sitting at my desk, in a Death Readiness hoodie, occasionally forgetting to turn on my ring light.
But if you like captions or want to follow along visually, that option is there. I’ll include the link in the show notes. And if you’re already watching on YouTube—hi, thanks for being here.
Alright, back to Diane’s question.
Diane is in the process of updating the beneficiaries on her retirement accounts, and she asked:
“What happens if I don’t name a beneficiary?”
A lot of people, including some financial professionals, will tell you that if you don’t name a beneficiary, the account just goes to your estate.
Meaning, it passes under your Will, or, if you don’t have a Will, under your state’s intestate succession laws.
And just as a quick refresher, intestate succession is the system your state uses to decide who gets your assets if you haven’t made those decisions yourself. It’s a fixed hierarchy—spouse, children, parents, siblings, and so on.
But I want to slow this down and give you a real example.
A few years ago, I represented a woman, I’ll call her Angela, whose husband had passed away. They had four adult children together.
As part of the estate administration, we met with her husband’s financial advisor. Let’s call him Chad.
And in that first meeting, Chad told us two things:
First, Angela’s husband had not named a beneficiary on his IRA.
And second, that IRA would be distributed as part of his estate.
Now, based on everything we’ve talked about so far, when Chad said “estate,” what he meant was Angela’s husband’s probate estate.
Angela’s husband did not have a Will. And because he and Angela had four children, his estate was distributed under Tennessee’s intestate succession rules.
In Tennessee, that means the surviving spouse receives one-third, and the remaining two-thirds are divided among the children.
The IRA was worth about $500,000.
So if Chad was right, Angela would have walked away with about $167,000 of that $500,000 IRA account.
But I did not rely on Chad’s statement.
When he told us the IRA would pass through the estate, I asked him a very simple question:
“How do you know?”
And his answer was: “That’s just how it works.”
And I want to pause here for a second—because “that’s just how it works” is not an answer, especially when we’re talking about hundreds of thousands of dollars.
We already know what happens if you accept Chad’s answer that the IRA passed through Angela’s husband’s probate estate. Angela walks away with $167,000 of a $500,000 IRA.
So I asked Chad to see the plan agreement. The plan agreement is the contract between the account owner, in this case, Angela’s husband, and the financial institution administering the IRA. And it should tell us exactly what happens if no beneficiary is named.
If Chad was confident enough to say, “It goes to the estate,” then he should have been able to show me where it said that.
But instead of showing me the agreement, he doubled down and repeated: “It’s the estate.”
Still not good enough. So eventually, he agreed to get me a copy of the plan agreement.
And when I finally saw it, it said something pretty remarkable.
It said that if a married account owner dies without naming a beneficiary, the account passes directly to the surviving spouse. The spouse. Angela.
Instead of receiving $167,000, Angela was entitled to the full $500,000 IRA.
It didn’t make any difference to Chad where that money went. But it made all the difference to Angela.
So let’s bring this back to Diane’s question: “What happens if I don’t name a beneficiary on my retirement account?”
The answer is: it depends on the plan agreement.
This is what Death Readiness really looks like.
It’s not just filling out forms or checking boxes.
It’s understanding what actually controls the outcome.
It’s asking better questions, slowing things down when something doesn’t feel right and taking ownership instead of relying on assumptions.
Because this is your life, your family, and your money.
So if someone tells you, “That’s just how it works,”
I want you to hear my voice in the back of your head saying… “Okay, but how do we know that?”
Because sometimes they’re right. And sometimes they’re very, very wrong.
If today’s episode made you realize there are parts of your estate plan you’re not completely sure about, that’s exactly why I created The Death Readiness Playbook, now in its second edition.
It helps you organize your information, ask better questions, and understand what actually controls your plan.
You can reserve your copy at deathreadiness.com/playbook.
And if you want updates on the Playbook and everything else I’m working on, you can sign up for my weekly email newsletter at deathreadiness.com/subscribe.
Thanks for listening today.
This is Death Readiness, real, messy and yours to own. I’m Jill Mastroianni and I’m here to help you sort through it, especially when you don’t know where to start.
Hi, I'm April, Jill's daughter. Thanks for listening to The Death Readiness Podcast. While my mom is an attorney, she’s not your attorney. The Death Readiness Podcast is for educational and entertainment purposes only. It does not provide legal advice. For legal guidance tailored to your unique situation, consult with a licensed attorney in your state. To learn more about the services my mom offers, visit DeathReadiness.com.
