Why Naming (and Updating) Your Beneficiaries Really Matters

When it comes to planning your financial future and protecting the people you care about, few things are more important—or more often overlooked—than your beneficiary designations.

It might seem like a small detail, but who you name as a beneficiary on accounts like your retirement plans, life insurance policies, or investment accounts can have a major impact. In fact, your beneficiary designations can even override what's written in your will.

Here’s why reviewing and updating your beneficiaries should be a regular part of your financial checklist.

Beneficiaries Trump the Will

Many people are surprised to learn that their beneficiary designations take legal priority over their will. That means if your will says one thing but your account paperwork says another, the beneficiary form wins.

For example, if your will leaves your IRA to your spouse, but your ex-partner is still listed as the beneficiary on the IRA account, your ex could still legally receive those assets. It’s not a rare occurrence—and it’s a costly mistake that can be easily avoided with a little proactive planning.

When to Review and Update Your Beneficiaries

Life changes, and your beneficiary designations should reflect those changes.

Here are a few common life events that should prompt a review:

• Marriage or remarriage

• Divorce

• Birth or adoption of a child

• Death of a previously named beneficiary

• Change in financial or family dynamics

• Major updates to your estate plan or will

Even if no big changes have occurred, it’s a good habit to review your beneficiary designations annually—just to make sure everything is still aligned with your intentions.

Common Mistakes to Avoid

When it comes to naming beneficiaries, small oversights can lead to big consequences. Here are some pitfalls to watch for:

• Forgetting to name a beneficiary: If you leave the designation blank, your assets may go through probate, delaying access and adding unnecessary legal hurdles.

• Not naming a contingent (secondary) beneficiary: If your primary beneficiary can’t receive the assets (due to death or legal issues), having a backup ensures your wishes are still carried out.

• Naming minors without proper planning: If a minor child is named as a beneficiary, a court-appointed guardian may need to manage the assets until the child reaches legal age. A trust may be a better option in these cases.

• Assuming a will covers everything: As mentioned earlier, wills don’t control accounts with named beneficiaries—so all documents need to work together.

The Bottom Line

Taking the time to review your beneficiary designations isn’t just good housekeeping—it’s a powerful way to protect your loved ones, avoid confusion, and ensure your financial legacy is distributed exactly how you intended.

If you're unsure whether your current designations are up to date or how they align with your broader financial plan, be sure to reach out to your financial advisor for guidance.