Personal Insights

Estate Planning Basics: What to Know About Beneficiary Designation

Estate planning isn’t a one-time exercise; it’s an ongoing process that will likely change as you experience new milestones in life. An important element of ongoing estate planning is choosing and updating — when necessary — beneficiaries for all your financial accounts and applicable insurance plans.

Consider these answers to common questions regarding beneficiary designation to help make a plan that’s right for you and your family.

How Do I Choose Beneficiaries?

Think about the legacy you want to leave when deciding on whom or what should be the designated beneficiary on an account. “Death is not something we want to think about, but it is something everyone should plan for,” says Gena Wolbrecht, Senior Vice President, Platform Investments Executive, Regions Investment Services. Before you name a beneficiary, you need to think about your strategy and the purpose of your legacy, Wolbrecht says. Once you identify your goal, it’s time to pick a beneficiary that fits in with your plan. “It can be a trust, charity, loved one, university, or any organization, but it should be thought through.”

Most accounts will be set up such that both a primary and secondary beneficiary should be named, which are equally important to consider. The secondary beneficiary will inherit the monies in the account if the primary beneficiary is deceased. You can also divide up your estate by designating multiple primary beneficiaries.

When Should I Review My Beneficiaries?

Review your beneficiaries with any life change — such as a marriage, divorce, death, birth, or retirement — or annually, whichever comes first. If you don’t review your accounts and beneficiaries on a regular basis, you may find yourself in a situation where an ex-spouse is the primary beneficiary or a child is left out. If you listed a charity as a beneficiary, that organization may no longer exist.

Which Policies Need a Beneficiary?

Each of your financial accounts will probably need to have a beneficiary named. While personal insurance or life insurance might be the first accounts that come to mind, make sure you update your beneficiaries for all financial accounts, including retirement accounts, payable-on-death (POD) accounts, investments, and annuities.

What Happens if I Don’t Designate Beneficiaries?

If you don’t designate beneficiaries, or if beneficiaries are later disputed because they were never updated, the issue could end up in probate court, the section of the court system that manages wills and estates. In some circumstances, your assets could be given to the state. “A lot of people assume all of their estate will go to their loved ones,” says Wolbrecht. “But beneficiaries on accounts more often than not need to be designated.”

Carefully designating beneficiaries will ensure the legacy you’d like to leave is in place for the people or organizations you care about. A banker or financial advisor can be an invaluable resource as you go through this process. Learn more about making sure your estate plan is up to date.