5 Beneficiary Mistakes Families Make

5 Beneficiary Mistakes Families Make

By Brett S. Carleton, CFP®

When people think about estate planning, they often focus on wills and trusts. While those are important, one of the most common mistakes we find is much simpler: outdated or incorrect beneficiary designations.

The reality is that many assets—such as retirement accounts, life insurance policies, and annuities—pass directly to the beneficiaries listed on the account, regardless of what your will says. That's why it's important to review them regularly.

Here are some of the most common beneficiary mistakes we see:

1. Not Updating Beneficiaries After Major Life Changes

Marriage, divorce, the birth of a child, or the death of a loved one can all affect who should inherit your assets. Yet many people haven't reviewed their beneficiaries in years.

We've seen accounts that still list former spouses, deceased family members, or beneficiaries that no longer reflect the owner's wishes.

2. Forgetting to Name Backup Beneficiaries

Many people name a primary beneficiary but forget to add contingent (backup) beneficiaries.

If the primary beneficiary passes away before you do, the account may be subject to additional delays and complications. A backup beneficiary can help ensure your assets go where you intended.

3. Beneficiaries Don't Match the Estate Plan

Your beneficiary designations, will, and trust should all work together.

Sometimes families update their estate documents but forget to update account beneficiaries. This can result in assets being distributed differently than intended.

4. Naming Minor Children Directly

Leaving assets directly to minor children can create unnecessary complications and court involvement.

Depending on your situation, a trust or other planning strategy may provide a more effective way to manage assets for young beneficiaries.

5. Treating Beneficiaries as "Set It and Forget It"

This may be the most common mistake of all.

Families change. Circumstances change. Laws change. Beneficiary designations should be reviewed periodically, just like the rest of your financial plan.

A Quick Review Can Make a Big Difference

Reviewing your beneficiaries isn't complicated, but it can have a significant impact on your family's future.

If it's been a few years since you've checked your beneficiary designations—or if you've experienced a major life event—it may be time for a review. A simple update today could help avoid confusion, delays, and unintended outcomes for the people you care about most.

Disclosure: This material is for informational purposes only and should not be considered legal advice. Consult your attorney for guidance specific to your situation.