The Importance of Updating Your Beneficiaries

Dear Friends,

As we approach the end of Daylight Saving Time, I am reminded how precious time is. It’s typically during this season that I tend to look back over my year and wonder if I made the most of the extra daylight hours. Daylight Savings can be such a ritualistic event: we are reminded to change our smoke detector’s batteries, update our passwords, or use this event as a trigger for other annual check-ups. One important exercise is to mentally replay the past year to see if you have had any major life events that could trigger changes in your estate planning, specifically beneficiary changes.

Pitfalls of not updating beneficiaries are:

  • Possible probate – If there is no designated beneficiary on an asset held with a financial institution or if that beneficiary is deceased, then the asset will go to the decedent’s estate.  A simple beneficiary designation can avoid the timely and costly process of probate administration.
  • Unwanted beneficiary – In the case of a divorce, an asset that names your former spouse as beneficiary could possibly be distributed to that former spouse unless the divorce decree specifically states otherwise.  Often, the beneficiary designation is not updated simply due to oversight.  The same applies to re-marriage. There could be an unwanted result if beneficiary designations are not updated timely.
  • Defeating the purpose of a trust – Trusts are wonderful tools to aid in estate planning when correctly prepared.  Trusts require assets to be funded into the trust for them to be effective. However, if not funded correctly, the purpose of the trust could be defeated. Your asset table, which is provided in your estate plan binder, supplies the information needed to make informed funding decisions.
  • Not aligning with your current wishes – We all know that circumstances change over time, our children age and we lose loved ones.  A beneficiary designation that once made sense may not make sense anymore.  You worked hard to attain your assets and you want to make sure they are distributed according to your wishes.

Life events that may trigger changes to beneficiaries include:

  • Death of spouse
  • Divorce
  • Remarriage
  • Creation of Estate Planning documents such as a Revocable Living Trust or an Irrevocable Trust
  • Children reaching age of majority

Assets that may need beneficiaries to be updated:

  • Bank Accounts
  • Individual Retirement Accounts (IRA)
  • Life insurance
  • Annuities
  • Investment accounts
  • Health savings accounts
  • Transfer on Death (TOD) investment accounts
  • Payable on Death (POD) bank accounts

Appointed agents:

  • The same review should apply to appointed agents under your Will, Health Care Proxy, Power of Attorney, and Trust documents.
  • A review of these documents along with your beneficiary designations at the time of major life events makes sense.

It’s important to not only change the beneficiary, but confirm with the financial institution that it has been changed. Request something in writing from the financial institution that this has been completed. And finally, use this reminder to get out your estate plan binder and check if the beneficiaries and appointed agents still align with your interests. It is not only helpful to check the documents themselves, but our provided asset table and flowcharts to confirm all is up to date and copacetic.

If you do find that changes need to be made, please contact our legal assistant, Noah Evans, at [email protected] or my assistant, Julia Keefe, at [email protected] to schedule a time to check in regarding these necessary estate plan changes.

-Eileen Curtin