When was the last time you reviewed the beneficiary information on your life insurance policies, annuities, retirement accounts, or other financial accounts?
For many people, beneficiaries are selected when an account or policy is first established—and then rarely thought about again.
But life changes. Families change. Priorities change.
Marriage, divorce, the birth of a child or grandchild, the loss of a loved one, or simply the passage of time can all be good reasons to take another look.
A beneficiary is the person, people, trust, or other entity you designate to receive certain assets or benefits after your death.
Beneficiary designations are commonly associated with:
The rules can vary depending on the type of account, policy, contract, and applicable law, which is why it is important to understand how your individual designations work.
When reviewing beneficiary information, you may see two different categories: primary and contingent beneficiaries.
A primary beneficiary is generally the first person or entity designated to receive the benefit.
A contingent beneficiary is generally next in line if the primary beneficiary is unable to receive the benefit.
For example, someone might name a spouse as the primary beneficiary and adult children as contingent beneficiaries.
Having both primary and contingent beneficiaries designated can provide an additional layer of planning if circumstances change.
A beneficiary designation made years ago may no longer reflect what you want today.
Consider some of the life events that could make a review worthwhile:
Marriage or remarriage
You may want to add or update a spouse.
Divorce
An old designation may need attention. The effect of divorce on a beneficiary designation can depend on the account, policy, and applicable law, so don't assume it changed automatically.
Birth or adoption of a child or grandchild
Your family may have grown since the designation was originally completed.
Death of a beneficiary
If someone you previously named has passed away, the designation may need to be updated.
Changes in family circumstances
Relationships and financial needs can change over time.
A significant change in your financial picture
New insurance policies, annuities, retirement accounts, or estate-planning decisions may warrant reviewing how everything works together.
One point that can sometimes cause confusion is the relationship between a beneficiary designation and a will.
Certain assets that have valid beneficiary designations may generally pass according to those designations rather than according to instructions in a will.
That's one reason beneficiary designations shouldn't be considered in isolation.
Your insurance policies, annuities, retirement accounts, beneficiary designations, will, trusts, and broader estate plan should be reviewed with the appropriate financial, legal, and tax professionals so they work together as intended.
Some people consider naming their estate as beneficiary.
Depending on the circumstances, doing so can have different consequences than naming an individual or other beneficiary directly, including potential implications involving probate, creditors, taxes, and the timing of distributions.
There isn't one answer that's appropriate for everyone. If you're considering naming an estate or trust, it can be especially important to consult with an attorney or other qualified professional familiar with your circumstances.
Beneficiary designations are particularly important with life insurance and annuity contracts.
With life insurance, the beneficiary designation generally identifies who is intended to receive the policy's death benefit, subject to the terms of the policy and applicable law.
Annuities can also include beneficiary provisions that determine what happens to remaining contract value or available death benefits after the owner's or annuitant's death, depending on how the contract is structured.
Because annuity and life insurance contracts can differ, it's important to review the actual provisions of your specific policy or contract rather than assuming they all work the same way.
You don't necessarily need a major life event to review your beneficiaries.
A periodic check can be worthwhile.
Ask yourself:
Who are my current primary beneficiaries?
Have I named contingent beneficiaries?
Are the names and information current?
Have there been any major changes in my family?
Do these designations still reflect what I want today?
Do my beneficiary designations coordinate with my broader estate plan?
If you're unsure about any of those answers, it may be time for a review.
Beneficiary designations may be easy to complete, but they shouldn't be easy to forget.
Taking a few minutes periodically to review your beneficiaries can help you identify outdated information and make sure your current choices continue to reflect your wishes.
If you have questions about the beneficiary information on an existing annuity or life insurance policy, or would simply like help understanding where to find it, CDA of America is here to help.