The Importance of Updating Your Beneficiaries

LiLife is always changing—marriage, divorce, new children, or the loss of a loved one. But while we navigate these changes, one critical task often falls through the cracks: updating beneficiary information on our financial accounts. It’s a simple step, but one that can have significant consequences if overlooked.

Why Beneficiary Designations Matter

Beneficiary designations tell financial institutions who should receive your assets after you pass away. They override what’s in your will or trust for that specific account. That means if your will says your spouse gets your life insurance policy, but your ex-spouse is still listed as the beneficiary on the policy, the insurance company is legally obligated to pay the ex-spouse.

In other words: beneficiary designations speak louder than wills when it comes to certain assets, including:

• Life insurance policies
• Retirement accounts (401(k)s, IRAs, etc.)
• Bank accounts with Payable-on-Death (POD) instructions
• Investment accounts with Transfer-on-Death (TOD) instructions

Common Mistakes People Make

1. Forgetting to Update After Life Events Marriage, divorce, birth, death—these major life changes should always prompt a review of your beneficiary information. Failing to update could result in an ex-spouse receiving your assets, or a newly born child being left out.
2. Leaving It Blank Many people open accounts and skip this section. Leaving it blank can result in delays, confusion, and the account being subject to probate.
3. Not Naming a Contingent Beneficiary A contingent (or secondary) beneficiary receives the asset if your primary beneficiary has died. Without one, your assets may again be tied up in probate.
4. Using Minors as Beneficiaries Without a Plan Naming a minor as a beneficiary without establishing a trust or custodianship can create legal and logistical challenges. Most institutions won’t release funds directly to minors, meaning the courts could get involved to appoint a guardian.
5. Mismatch with Estate Plan Your beneficiary designations should align with your will or trust. If they don’t, your estate plan could be undermined.

Primary vs. Contingent Beneficiaries

• Primary Beneficiary: The first person(s) or entity to receive the asset.
• Contingent Beneficiary: The person(s) or entity who receives the asset if the primary beneficiary has died or cannot be located.

It’s good practice to assign both and keep their contact information up to date.

How to Review & Update Your Beneficiaries

1. List Your Financial Accounts Start by listing your retirement accounts, insurance policies, and any financial accounts that allow you to name a beneficiary.
2. Request Current Beneficiary Info Contact your bank or financial institution or log in online to view who is listed as your current beneficiary.
3. Make Updates as Needed Submit the appropriate forms to make changes. Some institutions may allow updates online; others may require paper forms.
4. Review Regularly Plan to review your beneficiary designations annually or after any major life event.
5. Keep Copies Store copies of your beneficiary forms in a safe place and let a trusted person know where they’re located.

When Should You Review Your Beneficiaries?

• After marriage or divorce
• After the birth or adoption of a child
• After the death of a beneficiary
• When you establish or update your estate plan
• Annually, during your financial check-up

The Cost of Not Updating

Failure to update your beneficiaries can cause emotional distress and financial loss for your loved ones. It can also lead to legal challenges, unintended distributions, and even family disputes. This simple task is one of the most powerful tools in your estate planning arsenal.

Take 10 Minutes Today

Set aside a few minutes to log in to your financial accounts and verify your beneficiaries. It’s a quick task that can protect your legacy and bring peace of mind.