The Importance of Regularly Updating Beneficiary Designations

One of the few constants in life is change; new relationships, family additions and losses, changed jobs and financial circumstances.  It is essential to regularly revisit and update your beneficiary designations to keep up with all of life’s changes.  Assets where you have a named beneficiary will transfer at death according to the beneficiary paperwork, not your will.  Below are significant reasons to keep beneficiary designations current.

  1. Marriage.  When you marry someone, you may want to designate your new spouse as your primary beneficiary on some or all your assets.  For some assets a spouse is the default beneficiary, but not always.  Completing a beneficiary form with each financial institution ensures that your spouse receives the intended benefits from your life insurance policies, retirement accounts, and other assets.
  2. Divorce or Relationship Changes.  After a divorce or the end of a significant relationship, it’s crucial to review and update beneficiary designations. Failing to remove an ex-spouse or former partner could lead to unintended consequences and disputes over asset distribution.  In Minnesota, divorce statutes provide for the revocation of an ex-spouse as a beneficiary, however, if a bank is not aware of the divorce and an ex-spouse collects the assets upon your death it can be difficult and painful for your loved ones to collect the assets.
  3. Birth or Adoption of a Child.  Welcoming a new child into your family is a joyous occasion. Updating your beneficiary designations to include your child helps ensure they are provided for in the event of your passing.  Note, naming a minor as a beneficiary on an asset is not always the best planning tool so talk to an estate planning attorney about options for minor children.
  4. Death of a Beneficiary.  If a named beneficiary passes away, it’s essential to update the designation. This ensures that your assets are distributed according to your updated wishes and avoids unintended beneficiaries if that asset is without a named beneficiary.
  5. Financial Changes.  Significant financial changes, such as starting a new job with possible new retirement accounts, acquiring new assets, or changes in your overall financial situation, should prompt a review of beneficiary designations.
  6. Retirement.  As you near retirement it is important to review and update the beneficiaries on your retirement accounts. This is especially crucial if you have changed jobs over the years or consolidated retirement funds from different employers as you may have named different beneficiaries on different accounts.
  7. Routine Review.  Even without major changes to your life and beneficiaries it is still recommended that you conduct regular checkups of your beneficiary designations so you know your designations reflect your current wishes.

Working with a professional you can ensure your beneficiary designations and estate plan work together to achieve your legacy goals.  By staying proactive and managing your beneficiary designation we can make adjustments to align with life changes. Taking the time to review and update these designations reflects a commitment to ensuring that your wishes are honored, and your financial legacy is passed on thoughtfully and efficiently.