Are the Beneficiaries on All of My Accounts Up to Date?

Are the Beneficiaries on All of Your Accounts up to Date

The Importance of Keeping Beneficiary Designations Up to Date: A Crucial Aspect of Financial Planning

While many people are diligent about contributing to their retirement accounts, tracking their budget, and monitoring their investments, they often overlook a crucial aspect of financial planning: keeping beneficiary designations up to date. Take the time to verify that your beneficiaries on your investment accounts, life insurance, and other financial accounts reflect your wishes and are aligned with your full estate plan.

How often to review Beneficiaries?

You should review your beneficiary designations on an annual basis at a minimum. If this has not been performed in some time, it is likely that you may have experienced any number of life events that warrant a review. Many factors such as births, deaths, marriage, divorce, illness, purchase of a home, and financial changes, are just some of the events that can affect your desired disbursement of assets. 

Why should you review Beneficiary Designations?

Beneficiary designations override any instructions that you have placed in your will or trust. When the account owner dies, the assets go directly to those named as beneficiaries. This will bypass the probate process, which can be very long, expensive, and may expose the account to public scrutiny. Failing to update your beneficiary designations can have unintended beneficiaries, such as an ex-spouse receiving assets.

Contingent beneficiaries are also an important consideration to add to your accounts. Without a contingent beneficiary on your accounts, if the primary is deceased and unable to inherit your assets, the assets could end up in probate.

Not updating your primary and contingent beneficiaries can have negative consequences. Delays can occur when assets need to be distributed, and liquidity is needed immediately. Properly designated beneficiaries will allow the asset to pass outside of the estate. If done incorrectly, and the asset passes through the estate, it exposes itself to creditors. Incomplete or conflicting designations can create delays and inefficient asset distribution.

Keeping beneficiary designations up to date is an essential aspect of financial planning that should not be overlooked. By regularly reviewing and updating your designations, you can ensure that your assets are distributed according to your wishes and avoid potential conflicts and financial hardships for your loved ones.

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