Q: Why should I look at my beneficiary designations if I already have a will or a trust?
A: Many people think that once they sign a will or a trust, all of their assets will follow those instructions. The truth is that certain accounts do not go by what your will says. Life insurance policies, retirement accounts, such as IRAs and 401(k) plans, and even some bank or investment accounts with a “payable on death” or “transfer on death” designations will pass directly to the person named on that form. In most cases, the paperwork on file with the company controls, not your estate planning documents.
Reviewing any beneficiary designations on your accounts is not only about catching mistakes like leaving an old beneficiary listed by accident. It is also about making sure the people you care about are protected. For example, if you have created a trust for your children but your IRA still names them directly, those funds may end up exposed to creditors, divorcing spouses, or poor financial decisions. By updating the beneficiary designation so that the account passes through the trust, the funds can be managed and preserved for your family while still being available for important needs like health, education, maintenance, or support.
The same is true if you have a loved one with special needs. If that person receives an inheritance outright, it could affect their eligibility for government benefits. Directing the inheritance into a Supplemental Needs Trust ensures they are cared for without losing essential support.
It is crucial to name both primary and backup beneficiaries. If your first choice has died or cannot accept the inheritance, the account will otherwise be pushed through probate, which may cause unnecessary delays and expenses.
Life does not stand still. Marriage, divorce, the birth of a child, or the loss of a loved one should always lead you to review your designations. Fall is also a natural time to handle these updates, as families are getting organized before the year comes to a close.
The bottom line is simple. Beneficiary designations are powerful tools, but only if they are current and coordinated with the rest of your estate plan. A short review now can give you peace of mind and ensure your legacy is protected for the future.