Have you reviewed your beneficiary designation for your retirement or life insurance account within the last year? If not, it is highly recommended that you do so. Designating a beneficiary is something people typically do once and forget about, because no one really wants to think about their own death. However, updating a named beneficiary is an essential step to ensure your estate planning is effective and your wishes are followed after your passing.
A beneficiary is the person or legal entity who will receive the benefits upon the granting party’s death. Beneficiary designations in a retirement account take precedent over your will, and will be governed by state or federal law laws rather than provisions in the will. Many people tend to keep important documents, such as their will, up to date but tend to neglect other assets like retirement accounts. For example, if an ex-wife is still named as a beneficiary for one’s retirement plan, the ex-wife will receive the benefits over the current wife that may be named in the will. To prevent such an occurrence, it is important to review and update your beneficiary designation when you experience a major life change like a divorce, marriage, birth of child or grandchildren, or death of spouse.
No Beneficiary Listed
If a beneficiary is not listed, the benefits will follow a particular order. Typically it begins with the living spouse. Then it may flow to children, parents, siblings, or the decedent’s estate.
A recent article on the same topic encourages people to update their designated beneficiaries for all of their accounts, including bank, retirement, brokerage, and life insurance. Many people incorrectly believe anything stated in their will overrides any named beneficiary in other accounts. This is wrong! Try to review your beneficiary designation once a year, or after any major life experience.