New year, new beneficiary?

The start of a new year is a time to focus on goals and any lifestyle changes that may need to happen to help accomplish those goals. While many people may focus on short term goals like weight loss, traveling more, or spending more time with family, it’s also a great time to think longer term. What are your financial goals and what kind of legacy do you want to leave? And when it comes to your legacy, is it being left to the right people?

Beneficiary designations

Many types of financial products allow you to name a beneficiary or beneficiaries. Life insurance policies, retirement accounts like 401ks and IRAs, bank accounts, and brokerage accounts can all be left to who or what you choose. And if you don’t choose beneficiaries for your assets, then a court or financial institution may decide what happens to your money.^[1]

A common mistake is having out-of-date beneficiaries, which causes your assets to go to people you don’t want. Divorce is a good example of this, and the Supreme Court has previously ruled that divorce does not revoke beneficiary designations. In Hillman v Maretta, Warren Hillman had named his wife Judy Maretta as the beneficiary to his life insurance policy in 1996. However, Warren divorced Judy in 1998 and later married Jacqueline Hillman in 2022, but he never updated the beneficiary to his life insurance policy. When Warren passed away, the two women fought over the money for five years. Ultimately, The Supreme Court found that his ex-wife, Judy, was entitled to the life insurance proceeds because she was still the designated beneficiary. In legal disputes, beneficiary forms outweigh final wills and testaments.^[2] So, even if you’ve updated your will, it won’t matter if you haven’t updated your beneficiary forms.

When major life events happen it’s important to update your beneficiaries. Marriages, divorces, births, adoptions, and deaths can all change who you want to leave your assets to. And if you haven’t reviewed and updated your beneficiaries recently, now is a great time to do so. Think about how your family has changed in the last few years, how does that impact your legacy?

And it’s not just the above-mentioned major life events that may warrant reviewing your beneficiaries. Some people name charities as their beneficiaries, does that charity still exist? Or what if your primary beneficiary has predeceased you? When you were younger and single you may have also listed your parents or siblings as a beneficiary, do you still want your assets to pass to them or is it time to update to a spouse or your own children? Another thing to note, banks and other financial institutions don’t automatically ask account holders to designate a beneficiary, so you may have postponed doing so and then forgot about it and have no beneficiary listed.^[3]

How to change your beneficiary

You can easily change your beneficiary at any time as long as it is a revocable beneficiary. If a beneficiary is irrevocable, it is almost impossible to remove them or change their share without their consent.^[4] Depending on the account, here is how you can make changes for revocable beneficiaries:

Life insurance – Contact your insurance provider either through their online portal or by calling them. You’ll likely have a form to fill out to confirm the change.

Financial accounts – Contact the financial institution. These accounts can include 401ks, IRAs, and investment accounts.^[5]

Your financial professional can also help you review beneficiaries for different products and accounts and help make sure the choices are still what you desire. If you have questions, it’s best to reach out to your financial professional for their guidance.

Disclosures:

Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

1 ttps://www.investopedia.com/terms/b/beneficiary.asp

2 https://www.millenialestateplanning.com/blog/negative-side-of-not-updating-beneficiary-designations/

3 https://www.bankrate.com/banking/add-beneficiaries-to-your-financial-accounts/

4 https://www.guardianlife.com/life-insurance/beneficiary

5 https://www.nerdwallet.com/article/investing/estate-planning/beneficiary

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