Estate planning is generally a pretty straightforward process: You decide who gets your assets when you die and then take the necessary steps to make sure that those assets get transferred according to your wishes. However, one often-overlooked aspect of estate planning is beneficiary designations.
What is a beneficiary designation?
Simply put, a beneficiary designation is a document that indicates who should receive your assets upon your death. This can include items such as life insurance policies, retirement accounts and even bank accounts.
Beneficiary designations are important because they override anything that may be written in your will. So, if you have a beneficiary designation for your life insurance policy that names your spouse as the beneficiary, then your spouse will receive the death benefit from the policy regardless of what your will says.
What happens if I don’t have a beneficiary designation?
If you don’t have a beneficiary designation in place, then your assets will be distributed according to the terms of your will – or, if you don’t have a will, they will be distributed according to state intestacy laws.
How do I change my beneficiary designation?
The process for changing this estate planning document varies depending on the type of asset in question. For example, you may need to fill out a new form with your life insurance company or bank in order to change the beneficiary on your life insurance policy or bank account.
Who should I name as my beneficiary?
This is entirely up to you – but it’s important to think carefully about your choice. You may want to name your spouse, children, other family members or even a close friend as your beneficiary. One thing to keep in mind is that your beneficiary designation will take effect upon your death, so you’ll want to make sure that the person you name as your beneficiary is someone who you trust to handle your assets in accordance with your wishes.
Yes, you should update your beneficiary designation any time your circumstances change. For example, if you get divorced and name your former spouse as the beneficiary of your life insurance policy, you will need to update the beneficiary designation to reflect your current marital status.