You Never Know Who You Work For- A Beneficiary Tune-Up
When Was the Last Time You Checked Who You Listed As Beneficiaries?
Fall is just around the corner. We are putting away summer furniture and getting ready for the
change of seasons. How about getting ready for the change of season in our lives? We are
busy, and when it comes to estate planning, many people think having a will or trust is enough.
But there is another important and often overlooked issue of who you have listed as your
beneficiaries on financial accounts, insurance policies, pensions, and other retirement accounts.
Making sure your designated beneficiaries are up to date is critical as people move, pass away, or relationships change.
Why Do Beneficiary Designations Matter?
Many people do not realize that beneficiary designations override your will. That means no
matter what your will says, the person listed as the beneficiary on your insurance policies,
pension and retirement accounts, IRA, or annuities will receive the funds directly. Meaning that
they will not be part of your estate and affected by your will. Your listed beneficiary
designations are legally binding and will take precedence over any other estate or trust
documents.
Failure to keep your listed beneficiaries up to date can lead to unintended consequences, such as
your ex-spouse being listed as the beneficiary on a life insurance. Notwithstanding what your
will states, your ex-spouse may receive the proceeds regardless of your will or other estate
documents.
When Should You Update Them?
A good rule of thumb is to review your beneficiary designations any time there’s a major life
event, such as:
Marriage or divorce
The birth or adoption of a child or grandchild
Death of a previously named beneficiary
Changes in your financial goals or family dynamics
Changes in your relationships (friendships, etc.)
However, even if you have no major life events, it is still a good idea to do an annual or at least
regular check-in to confirm that everything on your accounts is current and accurate.
What Accounts Should You Look At?
Accounts that require a designated beneficiary usually include:
Certificates of Deposit
Retirement Accounts (401(k), pensions, IRA, etc.)
Life Insurance Policies
Annuities
Transfer On Death (TOD) Financial Accounts
Payable On Death (POD) Bank Accounts (Savings, Checking, Money Markets, etc.)
Updating your accounts is usually a fairly easy process. You will need to contact each of your
financial institutions or plan providers, as they will have their own process for making changes
and updating beneficiaries.
Conclusion
Making sure that your accounts are updated is an easy but important task. And it is one that
does not take long and will ensure that your assets get to the people you want them to go to.
