Almost anyone can be named as a beneficiary: a spouse, child, friend, unrelated adult, charity, trust, business, or even your own estate. The rules that limit who can be named as a beneficiary are narrow but important. Federal law gives your spouse automatic rights to your employer-sponsored retirement plan, so naming someone else requires their written consent. A handful of other doctrines can strip a named beneficiary of the right to inherit, and certain recipients (minors, people with disabilities, pets, non-citizen spouses) need a legal structure around the designation or the money won’t reach them the way you intended.
The People and Entities You Can Name
There is no requirement that a beneficiary be related to you. The common categories are:
- Individuals of any kind. A spouse, child, parent, sibling, friend, neighbor, or anyone else you can identify by name.
- Charities and nonprofits. Charitable bequests are generally deductible for estate tax purposes.
- Trusts. Naming a trust lets you control how and when the money is distributed, which matters most for minor children or beneficiaries who need help managing money.
- Businesses. Corporations, LLCs, and partnerships can be named, which is common in business succession planning.
- Your own estate. Legally allowed, but usually a poor choice, because estate assets go through probate and become exposed to creditor claims.
Every designation should include a primary beneficiary and a contingent (backup) beneficiary. If the primary has died or can’t accept the assets, the contingent steps in. Leaving the contingent slot blank is one of the most common oversights in estate planning and can force assets into probate.
The Spousal Consent Rule for Employer Retirement Plans
This is the restriction that catches the most people off guard. Under federal law, employer-sponsored retirement plans (401(k)s, pensions, profit-sharing plans, and similar qualified plans) automatically treat your surviving spouse as the default beneficiary. To name anyone else, your spouse must sign a written waiver that is either notarized or witnessed by a plan representative, specifically acknowledging the effect of giving up their rights and identifying the alternate beneficiary.1Office of the Law Revision Counsel. 29 U.S. Code 1055 – Requirement of Joint and Survivor Annuity and Preretirement Survivor Annuity
The rule comes from ERISA and overrides any contradictory state law. A plan administrator will not process a beneficiary change form naming someone other than your spouse unless the spousal consent paperwork is attached. Separation does not end this right. If you are separated but not yet divorced, your spouse still has to sign.
IRAs work differently. Because IRAs are individually owned rather than employer-sponsored, federal law does not require spousal consent to name a non-spouse beneficiary. In community property states, though, a spouse may still have a claim to a portion of IRA assets accumulated during the marriage, so the practical freedom is narrower than it looks.
Naming a Minor Child
A child of any age can be named, but a minor cannot legally manage inherited assets. Financial institutions will not release money directly to someone under 18. Without a plan, a court appoints a guardian to hold the assets, which costs money, takes time, and puts the decision in a judge’s hands.
The cleaner approach is to name a trust for the child rather than the child directly. The trust document identifies a trustee, sets the age at which the child gets full control, and specifies what the money can be spent on in the meantime. A simpler alternative is a custodianship under the Uniform Transfers to Minors Act, adopted by most states. UTMA custodianships are easier to set up but give the child unrestricted access at 18 or 21, depending on state law.
Naming Someone on SSI or Medicaid
You can name a person with a disability as a beneficiary, but leaving money to them directly can cost them more than it gives them. A direct inheritance counts as a resource for Supplemental Security Income and Medicaid eligibility. If it pushes the recipient past the resource limit, their benefits can be suspended or lost, and the inheritance ends up replacing government assistance rather than supplementing it.
A special needs trust prevents that outcome. When properly structured, the trust holds assets for the beneficiary’s benefit without counting as their personal resource for SSI purposes. Federal law exempts these trusts from the normal resource-counting rules as long as the beneficiary is under 65 and disabled, the trust is established by a parent, grandparent, legal guardian, court, or the individual themselves, and the trust reimburses the state for Medicaid costs from any funds remaining at the beneficiary’s death.2Social Security Administration. SI 01120.203 – Exceptions to Counting Trusts Established on or After 01/01/2000
For smaller amounts, an ABLE account is simpler. These tax-advantaged savings accounts are available to individuals who became disabled before age 26 and accept contributions up to $19,000 per year in 2026. The first $100,000 in an ABLE account is excluded when calculating SSI resources, and Medicaid eligibility continues even if the balance exceeds that threshold.3Social Security Administration. Spotlight on Achieving a Better Life Experience (ABLE) Accounts
Leaving Money for a Pet
Animals cannot legally own property, so naming a pet directly does not work. A financial institution has no way to distribute money to a dog or cat. Most states now authorize pet trusts by statute. In a pet trust, the trust itself owns the funds, a trustee manages the money, and a designated caretaker handles the animal’s daily needs. You can specify the type of care, name a backup caretaker, and direct what happens to any remaining funds after the animal dies.
Non-Citizen Spouses and Other Non-U.S. Beneficiaries
A non-citizen can be named as a beneficiary, but the tax rules change. If you want to leave assets to a spouse who is not a U.S. citizen, the estate generally cannot claim the unlimited marital deduction, which is the provision that lets married couples transfer unlimited assets between each other free of estate tax. To preserve the deduction, assets have to pass through a Qualified Domestic Trust (QDOT), which requires at least one trustee to be a U.S. citizen or domestic corporation and collects estate tax when distributions are made to the surviving spouse.4Office of the Law Revision Counsel. 26 USC 2056A – Qualified Domestic Trust
Nonresident alien beneficiaries who receive U.S.-source income may face withholding. On Social Security benefits, the government withholds a flat 30% tax on 85% of the monthly benefit (effectively 25.5% of the total) unless a tax treaty provides a lower rate.5Social Security Administration. Nonresident Alien Tax Withholding When a beneficiary lives outside the United States, planning with an attorney who handles cross-border estates is worth the cost.
When a Named Beneficiary Loses the Right to Inherit
Even a valid designation can be undone by a handful of legal doctrines.
Divorce
Many states have revocation-upon-divorce statutes that automatically void a former spouse’s beneficiary status on wills and, in some states, life insurance policies. The U.S. Supreme Court upheld the constitutionality of these statutes in 2018, treating them as a default rule the account owner can undo by filing a fresh designation.
The catch is ERISA. A state revocation statute may not override an ERISA-governed retirement plan’s beneficiary form. If your 401(k) still lists your ex-spouse after the divorce, the plan administrator will likely pay your ex regardless of state law. Update every designation immediately after a divorce becomes final and do not rely on automatic revocation.
The Slayer Rule
Every state, in some form, bars a person who intentionally and unlawfully kills the asset owner from inheriting. Courts treat the killer as if they had died before the victim, redirecting the assets to the contingent beneficiary or the next person in line. The rule applies to wills, trusts, life insurance, joint accounts, and intestate succession.
Serving as a Witness to the Will
If you serve as a witness to a will and are also named in it, most states will void your gift while leaving the will itself valid. The rule exists to keep witnesses free of a financial stake in the document they are attesting to. Choose witnesses who are not beneficiaries.
Lack of Capacity
A beneficiary designation made when the account owner lacked the mental capacity to understand what they were doing can be challenged and potentially invalidated. Capacity disputes are most common with elderly account holders and are expensive to litigate. Keeping designations current while capacity is clear is the practical defense.
Beneficiary Designations Override Your Will
One more point worth building into any decision about who to name. A beneficiary designation on a life insurance policy, 401(k), IRA, or bank account is a contract between you and the financial institution, and that contract takes legal priority over anything your will says. If your will leaves everything to your children but your ex-spouse is still listed on your life insurance policy, your ex gets the payout. The will does not touch that asset.
For ERISA-governed retirement plans, this priority is reinforced by federal preemption: the plan follows its own beneficiary form, and state probate law cannot override it. Life insurance policies, IRAs, and payable-on-death and transfer-on-death accounts similarly follow their own designation documents rather than the will.
The practical rule that follows from all of this: after any marriage, divorce, birth, or death in the family, review every designation on every account, not just the will. Whoever is on the form is who gets paid.