Estate planning requires thinking about pretty unpleasant topics, like what is going to happen after your death. Since this isn’t a fun subject to consider, it’s not a surprise that many people put off creating an estate plan. Many people also make a plan, but then assume that they are done and they don’t have to think about it anymore. 
That can be a mistake. Estate plans require updates! Outdated plans lead to stress, hassle, and expense for your loved ones who you leave behind when you pass away. It can also cause you to become unable to leave your desired legacy. That’s a really frustrating thing to happen when you work hard throughout your life to save money and to build wealth.
Don’t put yourself in a position where an oversight leads to an undesirable outcome. So, to make sure that does not happen to your loved ones, there’s one key estate planning task that you need to make certain you take care of each and every year!
Don’t forget to check your designated beneficiaries on an annual basis!
There’s one crucial task that many people overlook — checking designated beneficiaries on your accounts! To help you remember, put a recurring alert on your calendar.
If you buy a life insurance policy, you need to name a beneficiary who gets to collect the death benefit if you pass away. If you have a 401(k) or other workplace retirement plan, you will be asked to name a beneficiary. Many financial accounts ask you to specify a person who is to be paid upon your death.
In some cases, there are restrictions on who you can name. There is some freedom and flexibility with regard to who you name as your beneficiary. This can become a problem if you name someone, but then you do not update that person when your life circumstances change.
For example, you list your parents as the beneficiaries on your 401(k) or on a life insurance policy that you sign up for because you get access to it as part of your workplace benefits. If you are young and single, this may be the logical option. But, as your life changes over time, you may find a partner who you would want to provide for if something should happen to you.
If you do not update your designated beneficiary, then it is possible that whoever you initially named will inherit the money, property, or death benefit. This is true even if your Will says some other person or entity is supposed to inherit all of your property. Assets with a designated beneficiary go to the person who is listed as the beneficiary on the account, even if your Last Will and Testament names someone else.
Why is checking your beneficiary designation such an important thing to do?
There is a lot of money in workplace 401(k) plans. NerdWallet reports that there was a collective $8.9 trillion in 401(k) plans held by all Americans in the third quarter of 2024. There was also around $15.2 trillion invested in IRA accounts.
This is a very substantial amount of money, and no one who has worked hard to invest for their retirement wants the money they saved to go to someone who they wouldn’t have chosen. Likewise, no one wants a life insurance benefit to go to the wrong person, as life insurance benefits are often worth hundreds of thousands or even millions of dollars.
The problem is, if you do not update your beneficiary designations as your life changes, all of this money could wind up in the wrong hands. This is not the right outcome for anyone, especially when averting potential disasters is as simple as checking on the information on your accounts each year to make sure your beneficiary and your backup beneficiary are still the people who you would want to get the account funds or the insurance payout.
An experienced estate planning attorney at The Mendel Law Firm, L.P. can assist you in taking care of this estate planning task and help ensure your estate plan is comprehensive. Give us a call today to talk with an estate planning attorney by reaching out at (281) 759-3213. You can also contact us online.
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