Beneficiary Designations
Plain English
Accounts like retirement plans, life insurance, and many bank accounts pass directly to whoever is named as beneficiary on the account itself — regardless of what your will says. An outdated beneficiary form is one of the most common estate-planning mistakes.
What is it?
A beneficiary designation is an instruction, filed directly with the account custodian or insurer, naming who receives that specific asset upon the owner's death. These designations generally take precedence over instructions in a will for that same asset.
Why does it matter?
Beneficiary designations are frequently set once (when an account is opened) and never revisited — so a divorce, remarriage, birth, or death in the family can leave an outdated designation in place, directing assets to an unintended person.
How does it work?
Common accounts requiring beneficiary designations include retirement accounts (401(k), IRA), life insurance policies, and payable-on-death (POD) or transfer-on-death (TOD) bank and brokerage accounts.
Risks and limitations
Because these designations override a will for that asset, failing to update them after a major life event can produce results directly contrary to a person's current wishes, regardless of what an updated will says.
Questions to ask a professional
When did I last review the beneficiary designations on my retirement accounts and life insurance? Do they still reflect my current wishes and family situation?