When most people think about estate planning, they think wills. And while a will is important, there’s one estate planning detail that often gets overlooked—but can override your entire plan in a heartbeat:
👉 Your beneficiary designations.
That’s right. It doesn’t matter what your will says if your listed beneficiaries tell a different story. And unfortunately, many people don’t realize this until it’s too late.
What Is a Beneficiary?
A beneficiary is the person (or people) you name to receive certain assets when you pass away. These designations are typically part of:
- Retirement accounts (401(k), IRA, Roth IRA)
- Life insurance policies
- Health Savings Accounts (HSA)
- Bank accounts with payable-on-death (POD) clauses
- Investment or brokerage accounts with transfer-on-death (TOD) clauses
You choose your beneficiaries when you open the account, and you can usually update them at any time.
Why Beneficiary Designations Matter So Much
Here’s the big deal: beneficiary designations take precedence over your will.
Let’s say your will says everything goes to your current spouse—but your old 401(k) still lists your ex. That money will legally go to your ex, no matter what your will says.
Why? Because these accounts are contractual. You signed an agreement with your provider (like your retirement plan or life insurance company) stating who receives the funds directly. That contract overrides your will in court.
Real-Life Consequences of Outdated Beneficiaries
Let’s look at a few common scenarios:
❌ You Forgot to Update After a Divorce
This is one of the most common missteps. Many people forget to update their life insurance or retirement accounts after a separation, and their ex-spouse ends up inheriting everything.
❌ You Listed a Minor Child
Naming your child directly may seem logical, but if they’re under 18, a court will likely step in and appoint someone to manage the money—possibly someone you wouldn’t have chosen.
❌ You Left It Blank
Some people never fill in the beneficiary section at all. When that happens, the asset typically goes through probate, delaying access and creating potential disputes.
How to Check and Update Your Beneficiaries
Fortunately, fixing this is easy. Here’s how:
Step 1: Make a List
Start by listing all your accounts that have beneficiary options. Common ones include:
- 401(k) or 403(b)
- Traditional or Roth IRA
- HSA
- Life insurance
- Bank or brokerage accounts with POD or TOD options
Step 2: Log In or Call Your Provider
Most institutions let you view and update beneficiaries online. If not, call customer service or request a paper form.
Step 3: Choose Primary and Contingent Beneficiaries
- Primary: This person receives the asset first.
- Contingent: If the primary beneficiary passes away before you, this person receives it instead.
Step 4: Keep Documentation
Once updated, download or save confirmation of your changes, and keep it with your estate planning documents.
Tips for Choosing the Right Beneficiaries
- Use full legal names, not just “my spouse” or “my kids”
- Consider age: Minors can’t legally receive funds directly
- Keep it updated: Review it every 2–3 years or after life events (marriage, divorce, births, deaths)
- Avoid unintended conflicts: Make sure your will and beneficiary designations align
How This Ties Into Your Bigger Estate Plan
Your beneficiaries are part of the foundation of your estate plan. Even if you don’t have a will yet, naming (and updating) beneficiaries ensures your loved ones receive what you intended, quickly and without a long court process.
It’s a small step with huge impact—and it takes less than 30 minutes.
Beneficiaries Trump Wills—So Get Them Right
If you take one estate planning step today, let it be this: review your beneficiaries. This single action can prevent years of legal battles, financial delays, and family stress.
Estate Planning Guide Related Posts
- Estate Planning Basics: What You Need to Know
- How to Write a Simple Will (Even If You’re Not Rich)
- How to Organize Your Important Financial Documents
- How to Store Estate Planning Documents Safely
📘 Get the Free Estate & Life Planning Starter Kit
Take the stress out of getting organized. This free printable kit includes checklists, worksheets, and templates to help you start (or update) your estate plan with confidence—no legal jargon required.
