Beneficiary Designations: Why They Matter

 

Women are often connectors within the family. You very well may know the feeling of managing other’s emotions during major life events—and of helping family members through difficult times. Women are also more likely to survive their spouse,¹ which means they’re more often tasked with adjusting legacy plans. You want to make sure everyone is taken care of—and that your legacy is honored.

 

This is why beneficiary designations matter so much: It’s a simple process that is often overlooked. Why? Often when you open an account, such as a 401(k) or a brokerage account, you’re asked to designate a beneficiary. Many people choose a beneficiary, enter that person’s information on the form—and then don’t think about it again. That quick decision can have unexpected ramifications.

 

Your designation overrides what you’ve expressed in your Will. For example, let’s assume that you opened a brokerage account 20 years ago and named your spouse as the beneficiary. Since then, you’ve divorced and remarried. You updated your Will to include your current spouse, but you didn’t remember to update the beneficiary named to your brokerage account. Beneficiary designations trump estate documents, so in the event of your death, your ex-spouse would likely receive the brokerage account proceeds.

 

The same is true when it comes to naming minor children as your beneficiaries. Your estate plan may dictate that they receive their inheritance over a period of time, when they are adults. However, if you’ve named them as a direct beneficiary, it’s possible—and maybe even likely—that they will receive their inheritance in one lump sum as soon as they reach the age of legal majority.

 

Your designation makes for a faster transfer of legacy. Beneficiary designations can also make transferring assets more straightforward. With the proper documentation, assets generally pass directly to the named beneficiary without the need for probate. Retirement accounts may offer additional options for preserving tax-deferred treatment, although the rules vary depending on account type and beneficiary.

 

Beneficiary designations can help to avoid probate. Without an up-to-date beneficiary designation, passing assets to your loved ones may be less straightforward. Depending on the type of account and its terms, the assets may become part of your estate and potentially subject to probate, even if your Will or Trust reflects your wishes. With retirement accounts, beneficiary designations can be particularly important, because the person designated to inherit the account can affect the available distribution options and the resulting tax treatment.

 

The good news is that you can change your beneficiary designations at any time. The process is often as simple as when you opened the account: Log on (or contact your account administrator) and update the information. If you prefer to name more than one beneficiary on a specific account, that’s almost always an option. In that instance, you can indicate that you’d like it to be divided evenly, or allocate percentages.

Events That Should Trigger a Review

Beneficiary designations should be reviewed upon the occurrence of any of the trigger events listed below. If none of these apply, but it’s been at least 5 years since you last reviewed them, then consider the passage of time as a trigger event.

 

Marriage. Your own marriage isn’t the only one that may prompt a review of your beneficiary designations. Marriages involving children, grandchildren, siblings or loved ones can change family dynamics and financial circumstances, giving you reason to consider who you want to benefit from your assets and in what proportions.

 

Divorce. In the emotions surrounding a divorce, many people forget to adjust their designations. It’s one of the most common oversights that we see. Whether it’s you or one of the loved ones you’ve named in your plan, divorce is a trigger event that should prompt a review of your beneficiary designations to ensure they reflect your wishes. 

 

Death. A death in the family can change both relationships and financial circumstances, making it a good time to review your beneficiary designations. That may include replacing a beneficiary who has passed away, or reconsidering how you want to allocate assets among your remaining beneficiaries.

 

Birth. The birth of your own children, of course. But new grandchildren and nieces and nephews can also have an impact. As your family grows and evolves, it is likely that your plan does the same. The addition of new family members provides another opportunity to ensure all beneficiary designations are updated.

 

Declining health or mental capacity. Changes in a beneficiary’s health or ability to manage financial matters may warrant a fresh look at your beneficiary designations. Depending on the circumstances, you may want to consider whether leaving assets via your Will or Trust may better support your loved one’s needs.

Beneficiary Designations: Best Practices

In addition to understanding the importance of beneficiary designations and the trigger events to be aware of, here are a few simple best practices to help ensure that your beneficiary designations reflect your wishes.

 

Avoid designating a minor as a beneficiary. In many jurisdictions, minors cannot directly inherit funds, including through this process. By designating a minor, you would likely trigger the probate process, with someone you may (or may not) want being the conservator of these funds on behalf of the minor child. Instead, consider naming a responsible guardian of your choice to be the designee, or designating a trust (either your living trust, or a trust the child already has) as the designee. This will make it more likely that the funds ultimately flow to the minor, as intended—consult with an estate lawyer on details.

 

Name contingent beneficiaries. Even if you review your designations regularly, circumstances can change quickly. A contingent beneficiary provides an added layer of planning if your primary beneficiary cannot receive the assets.

 

If you’re not designating an individual, consider designating a trust as a beneficiary, rather than your estate. If you designate your estate, the funds will need to go through probate, which could take additional time and expense for your loved ones. If you have a trust that has clear instructions for how you want your funds distributed, consider designating that instead. If you choose this route, we recommend talking with an estate lawyer to make sure you do it properly.

How to Review Your Beneficiary Designations

Start by inventorying all your assets and identifying accounts with beneficiaries. Your Wealth Advisor can help. The basics include retirement accounts, brokerage accounts, annuities, life insurance policies and bank accounts. There are also more specialized accounts like 529 plans, HSA accounts and pensions to consider.

 

Once you have them inventoried, think through the plan you have for your legacy—and how to make sure your beneficiary designations are in alignment with that plan. Then, systematically go through each account and confirm that the designations correspond to your plan. It’s a little work for a lot of peace of mind.

Lastly, Ask for Help During Tough Times

Major events like death and divorce are emotional. While grieving, it’s perfectly reasonable to do less, which may mean that some things fall through the cracks. At times like these, a trusted Wealth Advisor can step in with empathy (and a rational eye) to make sure you’ve got your financial bases covered.

 

We believe in building long-term financial relationships, so that when these events happen, we know our clients and what they need. If you’d like to start building a financial relationship with us, please just reach out—we’re always here to help.

 

¹ AARP, “In Brief: The Foundation: Social Security and Women,” May 2026. Accessed on October 13, 2026. Available at https://www.aarp.org/content/dam/aarp/ppi/topics/work-finances-retirement/social-security/the-foundation-social-security-and-women.doi.10.26419-2fppi.00408.001.pdf