Why It’s Important To Get Beneficiary Listings Right

Beneficiary listings trump wills

If you have one person listed to receive your IRA assets or your life insurance proceeds in your will, and a different person listed as a beneficiary, the beneficiary listing will take precedence.

Failure to name beneficiaries can be a costly mistake, and one that can cause your loved ones a great deal of hardship after you’re gone.

A named beneficiary is the party who gets the life insurance death benefit, and/or the proceeds from an annuity or other financial account when you pass away. Generally, these should be individuals that you identify by name.

Why are beneficiaries important?

It’s crucial to list your beneficiaries by name, so that the money can go to these loved ones right away after you are gone.

If you fail to name a beneficiary, then that money will usually go into your estate. That means it will go through probate – an expensive process that can potentially take months or even years to complete.

When you don’t name a beneficiary, everything in that account goes to your estate, and to probate first, rather than to your heirs. Your family and loved ones will only get what’s left, after months of waiting.

What to do now

It’s a good idea to physically look at all your financial accounts every year, and update both primary and contingent beneficiary listings. If you can answer “yes” to any of the following questions, you may need to update your accounts:

  • Have you married or divorced in the last year?
  • Does a divorce decree or property settlement agreement specify you have to name anyone in particular as a life insurance beneficiary?
  • Have there been any deaths among your current beneficiaries?
  • Do you have any stepchildren who need to be added?
  • Do amounts need to be adjusted?
  • Do you have children from a prior marriage? Do you want to keep them as beneficiaries?
  • Have any new children or grandchildren been born? If so, what share should they receive?
  • Are your current beneficiaries competent to receive the assets directly? Or should the assets go to a trustee or guardian?

A periodic review of all your beneficiary designations is an important step in the financial planning process. Don’t wait until it’s too late. Call us today.