A Small Update That Brings Clarity for You and Your Loved Ones
Beneficiary designations determine who gets your assets if something happens to you, and forgetting to review them is one of the more common (and avoidable) financial oversights adults make.
Even if you don’t own much yet, you likely have accounts with beneficiaries, such as bank accounts, a retirement plan, perhaps an online discount brokerage account where you trade stocks, or a life insurance policy. If these are outdated, the wrong person could end up receiving your assets, regardless of your original wishes.
What Estate Planning Really Means
In its simplest form, estate planning involves deciding what happens to your assets if you become incapacitated or pass away. That might sound heavy—but early estate planning is often more about keeping your account information up to date, especially beneficiary forms, as well as other legal papers.
What is a beneficiary?
A beneficiary is the person or entity that receives money in an account after the account holder passes away. You can designate beneficiaries on:
Bank and savings accounts
Retirement accounts (like 401(k)s and IRAs)
Investment accounts
Life insurance policies
Certain compensation
Real estate
Updating beneficiaries is typically fast and can often be done online.
Primary vs. Contingent Beneficiaries
Many accounts allow you to assign both primary and contingent beneficiaries.
Primary beneficiaries are the first to receive the assets. You can designate one person, multiple people (for example, split 50/50), or even a charity.
Contingent beneficiaries step in if the primary beneficiary dies before you. This backup ensures your assets still go where you want, without delays or confusion.
Scenario
Imagine you establish your first retirement account and name a parent as your primary beneficiary, and your sister as a contingent beneficiary. Five years later, your life has changed; you’re married, financially independent, and maybe supporting someone else. If you never update your beneficiaries and something unexpected occurs, the account still goes to the person you named years ago, not necessarily the person you’d choose today.
Reviewing Beneficiaries Matters
Life changes quickly. Relationships develop, and responsibilities grow. The person you would want to receive your assets from today might not be the same person you would choose three years from now. That’s why doing a simple review every couple of years, or after major life events like marriage, divorce, or having children, can make a meaningful difference.
When to Ask for Help
If you’re unsure who to name or how to split assets, a financial or legal expert can help you explore your options. The goal is to make sure your current life matches your account details.
Note: This article is for educational purposes only and does not constitute legal or financial advice. Consider speaking with a licensed professional for guidance specific to your situation.
In the End
Estate planning often begins with simple steps and doesn't always require complex documents. Taking a few minutes to review and update your beneficiaries can protect your intentions, your loved ones, and your peace of mind. Small actions today can avoid big problems tomorrow.
Disclaimer: Creek & Lyells Financial Literacy Foundation does not provide financial services, nor does it recommend or advise visitors to open accounts or buy or sell securities. All content on this blog is for educational purposes only. While we strive to provide accurate, relevant, and well-vetted information, visitors should consult a licensed financial professional and carefully evaluate the risks of any financial decision before taking action.