Many people spend time building their savings, investing for retirement, and creating a financial plan—but one simple step is often overlooked: reviewing beneficiary designations.
Keeping your beneficiaries up to date is an important part of your overall financial plan. Major life events can change who you want to receive your assets, and outdated beneficiary information may lead to unintended outcomes.
If it has been several years since you reviewed your beneficiary designations, now may be the perfect time to revisit them.
What Is a Beneficiary?
A beneficiary is the person, people, or organization you designate to receive certain assets after your death.
Many financial accounts allow you to name beneficiaries directly, including:
- Retirement accounts, such as IRAs and employer-sponsored retirement plans
- Life insurance policies
- Annuities
- Certain investment accounts
Because beneficiary designations are typically completed separately from your will, it's important to understand that they often determine who receives these assets.
Beneficiary Designations May Override a Will
One of the most common misconceptions is that a will automatically controls the distribution of every asset.
In many cases, assets with a valid beneficiary designation pass directly to the named beneficiary according to the account or policy paperwork. This means that if your beneficiary designation is outdated, the assets may be distributed in a way that no longer reflects your wishes.
That's why reviewing beneficiary designations should be an important part of any estate planning conversation.
When Should You Review Your Beneficiaries?
A good rule of thumb is to review your beneficiaries every few years, as well as after any major life event.
Examples include:
- Marriage
- Divorce
- The birth or adoption of a child
- The death of a spouse or beneficiary
- Retirement
- Significant changes in your financial situation
Even if nothing has changed, periodically confirming that your beneficiary information is accurate can provide peace of mind.
Primary vs. Contingent Beneficiaries
Many accounts allow you to name both primary and contingent beneficiaries.
A primary beneficiary is the first person or people designated to receive the assets.
A contingent beneficiary receives the assets if the primary beneficiary is no longer living or is otherwise unable to inherit.
Naming contingent beneficiaries can help ensure your assets are distributed according to your wishes if circumstances change.
Don't Forget About Minor Children
Parents often want their children to receive their assets, but naming a minor child directly as a beneficiary may create additional legal or administrative considerations.
Depending on your circumstances, there may be other planning options that better align with your family's goals. It's a good idea to discuss these decisions with your financial advisor and estate planning attorney before making beneficiary changes.
Keep Your Estate Plan Coordinated
Beneficiary designations are just one piece of a comprehensive estate plan.
Your will, trusts, powers of attorney, healthcare directives, and beneficiary designations should all work together to reflect your current wishes. Reviewing these documents periodically can help reduce confusion for your loved ones and ensure your plan remains up to date.
Final Thoughts
Reviewing your beneficiaries is one of the simplest financial planning tasks you can complete, yet it's often one of the most important.
Life changes, and your financial plan should change with it. Taking a few minutes to review your beneficiary designations after major life events—and periodically even when nothing has changed—can help ensure your assets are distributed according to your wishes.
If you're unsure whether your beneficiary designations are current or how they fit into your overall financial plan, consider speaking with your financial advisor. They can help you review your accounts and coordinate with your legal and tax professionals when appropriate.