An outdated beneficiary designation can undermine years of thoughtful estate planning. Make sure your accounts and your wishes are working together.

You’ve prepared a will. You’ve decided who should inherit your property. You’ve talked with your family about your wishes.

But what about the beneficiary designation you completed when you opened your retirement account fifteen years ago?

Or the life insurance policy you purchased before your second marriage?

Many people don’t realize that some of their most valuable assets may pass directly to named beneficiaries, regardless of what their wills say.

At Giamanco Law Partners, we help clients understand how beneficiary designations fit into their larger estate plans and identify potential problems before they create consequences for loved ones.

What Is a Beneficiary Designation?

A beneficiary designation identifies who should receive a particular asset when the account or policy owner dies.

Beneficiary designations are commonly associated with:

• Life insurance policies.
• 401(k), IRA, and other retirement accounts.
• Certain pensions and employment benefits.
• Payable-on-death bank accounts.
• Transfer-on-death investment accounts.

These arrangements may allow assets to pass directly to beneficiaries without probate.

But they also create an important planning responsibility: making sure the people named on those accounts are still the people you intend to receive the money.

Can a Beneficiary Designation Override Your Will?

In many situations, yes.

Assets with valid beneficiary designations generally pass according to those designations rather than instructions in a will.

Consider someone who prepares a new will leaving everything to their current spouse but forgets to update an old life insurance beneficiary designation.

Depending on the policy, applicable law, and other circumstances, the insurance proceeds may not go where the person expected.

A will does not automatically correct an outdated beneficiary designation.

This is why reviewing beneficiary information should be part of a comprehensive estate planning discussion.

What Happens After Divorce or Remarriage?

Major life changes are especially important times to review beneficiary designations.

Marriage, divorce, remarriage, the birth of a child, or the death of a previously named beneficiary can all affect your intentions.

Some state and federal laws may change the effect of certain designations after divorce. But those rules are not uniform, and some accounts and benefits are governed by federal law or plan documents.

Never assume that a divorce automatically removes a former spouse from every account.

An attorney can help you identify which designations should be reviewed and whether additional legal requirements apply.

What Is a Contingent Beneficiary?

A primary beneficiary is generally the person or entity first entitled to receive an asset.

A contingent beneficiary is someone designated to receive it if the primary beneficiary cannot or does not receive it under the applicable terms.

Without an appropriate contingent designation, the asset may be distributed according to the account agreement or policy terms, potentially resulting in outcomes you did not anticipate.

Naming contingent beneficiaries is a relatively simple step that can be important to the success of your estate plan.

Should You Name Your Trust as a Beneficiary?

Sometimes, but not automatically.

Naming a trust as the beneficiary of an account or policy may support certain planning goals, such as providing structured management of inherited assets.

However, trusts named as beneficiaries of retirement accounts can create complicated tax and distribution issues.

The correct designation depends on the type of account, the trust terms, and the beneficiaries’ circumstances.

Don’t change beneficiary designations to name a trust without first reviewing the consequences with qualified legal and tax professionals.

When Should You Review Your Beneficiary Designations?

Consider reviewing them after:

• Marriage, divorce, or remarriage.
• The birth or adoption of a child.
• The death of a beneficiary.
• A significant change in your financial situation.
• Creating or updating a trust.
• Changing jobs or retirement accounts.
• Preparing or revising your will.

Even without a major life event, periodically checking your designations is a sensible practice.

Your Estate Plan Should Work as One Plan.

A will, trust, retirement account, and life insurance policy shouldn’t be treated as unrelated pieces of paperwork.

They should work together to reflect your intentions.

Giamanco Law Partners can help you review your estate planning documents, identify potential conflicts, and understand what changes may be appropriate.

The best time to discover an outdated beneficiary designation is while you can still do something about it.

Frequently Asked Questions About Beneficiary Designations

Does my will override my life insurance beneficiary?

Generally, no. Life insurance proceeds usually pass according to a valid beneficiary designation, subject to applicable law and policy terms.

What happens if I forget to update my beneficiary after divorce?

The result depends on the type of account, the governing documents, and applicable state or federal law. Some designations may be affected by divorce, while others may remain effective.

Can I name more than one beneficiary?

Many accounts and policies permit multiple beneficiaries, often with designated percentages. The available options depend on the account or policy.

What happens if my beneficiary dies before I do?

The result depends on whether you’ve named contingent beneficiaries and on the governing account or policy terms. Without a surviving designated beneficiary, different distribution rules may apply.

Should I name my children directly as beneficiaries?

That depends partly on their ages and circumstances. Naming minor children directly can create complications because minors generally cannot independently manage substantial inherited assets. Trusts or other arrangements may be appropriate.

Can I name a trust as my retirement account beneficiary?

Often, yes, but the tax and distribution consequences can be complicated. Have an attorney and appropriate tax adviser review the trust and account before making that designation.

How often should I review my beneficiary designations?

Review them after major life changes and periodically as part of your overall estate planning. An estate planning attorney can help you coordinate those designations with your other documents.