One of the most overlooked, but critical, aspects of estate planning is keeping beneficiary designations up to date. While your will or trust outlines how assets should be distributed, certain accounts and policies, such as life insurance and retirement funds, pass directly to the beneficiaries named on those documents, regardless of what your estate plan says.
Failing to review and revise these designations can lead to unintended consequences, legal disputes, and emotional stress for your loved ones.
The Risk of Outdated Beneficiary Designations
It’s not uncommon for people to forget to update beneficiaries after major life events like marriage, divorce, or the birth of a child. For example, if an ex-spouse remains listed as a beneficiary on a life insurance policy, that individual could still receive the proceeds, even if your estate plan says otherwise.
In California, financial institutions are typically bound by the beneficiary form on file, even if it’s outdated. This means your assets could go to someone you no longer wish to benefit, bypassing your current will or trust altogether.
Where Beneficiary Designations Matter Most
Beneficiary designations are most commonly found on the following:
- Life insurance policies
- IRAs and 401(k) retirement accounts
- Payable-on-death (POD) or transfer-on-death (TOD) accounts
- Annuities and investment accounts
Each of these assets is considered non-probate, meaning they’re not controlled by your will. That makes it essential to treat them as a core part of your estate plan.
How Often Should You Review?
We recommend reviewing beneficiary designations at least every two to three years or whenever a major life change occurs. Key events include:
- Marriage or divorce
- Birth or adoption of a child
- Death of a named beneficiary
- Change in financial goals or tax considerations
You should also coordinate beneficiary choices with the structure of your overall estate plan to avoid conflicting instructions or unequal distributions.
For related guidance, see our blog: How Often Should You Update Your Estate Plan?
Don’t Let Small Details Undermine Your Plan
An outdated or incorrect beneficiary designation can undo years of careful planning. By reviewing your accounts and ensuring consistency across all estate documents, you’re protecting your legacy and giving your loved ones clarity during a difficult time.
Please do not hesitate to contact one of our experienced attorneys for legal advice. Call the trusted estate planning attorneys at Lowthorp, Richards, McMillan, Miller & Templeman at (805) 981-8555 or fill out our online contact form. We operate primarily in the Tri-Counties area – Ventura, Santa Barbara, and San Luis Obispo.