Without a doubt, reminding our clients to update beneficiary designations is the most consistent reminder we give them. As we are perusing statements for financial plans, we constantly see missing or old beneficiaries on different accounts.
Why do so many people have this issue of outdated or missing beneficiaries? Perhaps you made a will and failed to update the beneficiaries on your retirement accounts, annuities, and life insurance policies. Maybe you got married and never switched the beneficiary designation over to your new spouse. Or, you have had children and have updated your will, but still have a sibling or parent named as the beneficiary on your retirement accounts. They may still be the person you want to leave the asset to (or a portion of the asset), but make sure it aligns with your overall estate planning goals.
Why updating is so important
Beneficiary forms for these accounts are legally binding and will pass after your death to the person listed on the form with your employer or insurance company; the company holding the funds must follow the instructions you set out. Most importantly, these assets often comprise a significant portion of a client’s estate.
Here’s the important (and sometimes devastating) thing to remember:
Wills cannot override the person you have named as beneficiary – these designations take legal precedence over wills!
If your retirement funds or insurance policy pays out to their listed beneficiaries, there’s nothing your heirs can do — even if those payments contradict your will.
We’ve seen clients divorced for years and still have their ex-spouse listed as a beneficiary for their old retirement plans. They visibly cringe when we mention it – it’s often the last thing they want an ex-spouse to have.
Updating provides peace of mind
Beneficiaries can often gain relatively quick access to funds from life insurance or retirement accounts, providing them with financial support in a timely manner.
Ultimately, beneficiary designations can help prevent some potential nasty disputes among family members or potential heirs. If there is confusion about your intentions, then disagreements among your heirs may even end up in a very public court battle.
This can be even more critical if you have a blended family with multiple potential heirs.
What you can do now
Quick and Easy Steps to Update Your Accounts: Log in to your employee retirement portal and check to see who you have named as your beneficiaries. It’s usually easy to update online or find out how to do so. Also, do the same for any old employer plans that may still be hanging out there somewhere—these are often the ones with the most outdated beneficiaries!
Do you need help making a solid financial plan now that will also give you peace of mind for the future? If so, you can find out more about working with us here.