Beneficiary Designations: Who Gets the Money?

The end of the year is a natural time to reflect, reconnect, and refocus – especially when it comes to your financial and estate planning. While reviewing your will might not be at the top of your holiday to-do list, taking a few minutes to check your beneficiary designations can make a big difference. These designations determine who receives your life insurance, retirement accounts, and other assets—often overriding what’s written in your will. At Stone Oak Wealth, we encourage clients to keep these details up to date to ensure your wishes are honored and your legacy is protected.

This is especially important if there have been changes in your life, such as the birth of a child or grandchild, a death in the family, a divorce, or a remarriage. But even if your family situation remains the same, it’s a good idea to review your beneficiary designations to be sure they are complete and reflect your current wishes.

Beneficiary forms may override your will

A will is an essential legal document for designating your heirs and facilitating distribution of your assets if your estate goes through the probate process. However, the assets in most investment accounts, retirement accounts, and life insurance policies convey directly to the people named on the beneficiary forms — even if they are different from the people named in your will — and do not go through probate. However, small documentation gaps can still expose your family to massive delays, which is why reviewing common life insurance beneficiary mistakes before filing a new designation form is a critical defensive step.

Fortunately, it’s fairly easy to designate or change your account beneficiaries. A will may incur costs to update, but a new beneficiary designation form can typically be filed with the financial institution or insurance company at no cost.

Here are some issues to consider:

• Your current spouse must be the beneficiary of an employer-sponsored retirement plan unless he or she waives that right in writing. Without a waiver, any children from a previous marriage might not receive account proceeds.
• Designate secondary (contingent) beneficiaries in the event that the primary beneficiaries predecease you. Otherwise, proceeds would be distributed according to the default method specified in the account documents and/or state law.
• Some insurance policies, pension plans, and retirement accounts may not pay death benefits to minors. If you want to leave money to young children, you should designate a guardian or a trust as beneficiary.

The bottom line is this: your will may be thoughtfully written, but if your beneficiary forms are outdated, your assets could go to the wrong person. Reviewing and updating your designations is simple—and often free—but can spare your loved ones confusion, conflict, and unintended outcomes. At Stone Oak Wealth, we help clients align their documents with their values, so their financial plans remain both intentional and current.

Sources: Broadridge Investment Management Solutions

The use of trusts involves complex tax rules and regulations. You should consider the counsel of experienced estate planning, legal, and tax professionals before implementing trust strategies.

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