Change of Beneficiary – What You Need to Know

One of the main purposes of estate planning is to have control over how your assets are distributed when you die. When you choose people to receive your money, your home, your furnishings and personal belongings, they are called “beneficiaries.” A beneficiary is anyone who gains an advantage or profits from something. In the estate planning world, a beneficiary is someone who receives distributions from a will, a trust, a retirement account, a bank account, or a life insurance policy.

Beneficiaries are named specifically in these documents, or they have met whichever stipulations were set to make them eligible for the distribution specified. Generally, any person or entity can be named as a beneficiary in a will, a trust, or a life insurance policy. The one distributing the funds, the benefactor, can put various stipulations on the disbursement of the funds, and this is especially true of a trust. The settlor (creator of the trust) of a trust may impose certain conditions before a beneficiary receives money; for example, the beneficiary may have to earn a bachelor’s degree, reach a certain age, or get married before receiving assets or property in the trust.

Selecting beneficiaries is a critical aspect of the estate planning process. Once you have considered who will be responsible for settling your estate, the next step is to choose your beneficiaries. Deciding who gets your personal assets is a very personal decision. All too often, people make their beneficiary designations and then file their estate planning documents away for safe keeping, only for them to collect dust or be forgotten as the years go by.

Have you checked your beneficiary designations for your life insurance policy, bank accounts, retirement account, and securities recently? If not, you may be surprised to realize that your designated beneficiaries are not the people that you would choose today. This is especially the case if you have had children, divorced, or remarried since you initially made your beneficiary designations.

If you named a charity as your beneficiary ten, twenty, or thirty years ago, there is a chance the charity no longer exists. While many of us check our wills every year or every couple of years, a lot of us forget to check the beneficiary designations on our bank accounts, life insurance policies and retirement accounts. Since your retirement accounts pass outside of probate, they are generally not governed by the provisions in your will, so it’s crucial to keep all accounts with beneficiary designations updated.

Across the country, there have been many cases where retirement account owners who divorced and remarried neglected to update their beneficiary designation accordingly. This can be extremely frustrating for the survivors who must endure a court battle for the legal determination of the true beneficiary, and sometimes the court’s decision does not reflect what the deceased would have wanted.

As a Haddon Heights estate planning attorney with over 30 years of experience, I advise my clients to consider updating their beneficiary designations in the following situations:

  • When they get a divorce.
  • When they remarry.
  • When there is a birth in the family.
  • When there is a death in the family.
  • If there is a falling out with a close family member such as a child, a sibling or a grandchild.
  • When there is a major change in my client’s personal circumstances or finances.

Whenever you are looking to change a beneficiary designation, I highly recommend that you discuss such changes with a qualified professional. As the founder of Harris Law Offices, I have a 10.0 Superb Rating from Avvo, I am BV Distinguished® Rated by Martindale-Hubbell®, and I was selected for inclusion in New Jersey’s Super Lawyers®. With my knowledge and experience, I am prepared to fully explain the various types of beneficiary designations and assist you in changing them so they are tailored to meet your wishes and long-term goals.