The Importance of Updating Your Beneficiaries

March 04, 2016

Do you know who you have listed as your beneficiaries? If you can’t confidently state who you’ve noted, it’s probably time to take a look. Here’s a few answers to the questions we hear most often about beneficiaries.

What’s a beneficiary?

A beneficiary is a person or legal entity selected to receive money or other benefits from a benefactor. A benefactor is the person or entity providing said benefit. For example, in the context of a death claim, the benefactor is the person who passed away, and the beneficiary is the person receiving the death benefit. Most commonly, a beneficiary would be a person’s spouse and/or children.

Beneficiaries take precedence over any other form of legal documentation. This includes divorce decrees, wills, trusts, and any other formal, legal documentation. It does not matter which document is more recent; the beneficiary form will always hold authority over any records.

How frequently should beneficiaries be updated?

We suggest updating beneficiary forms every one to two years, or whenever a change in life occurs. This could be a significant life change, such as marriage, divorce, death of a spouse, or even the birth of a child or grandchild. It could also be a beneficiary’s address and/or name change.

If beneficiaries are not regularly updated, accounts could end up in the wrong hands, leaving the unspecified intended beneficiary with little legal recourse. Here are a few scenarios of beneficiary neglect:

  • An individual is divorced or remarried, but neglects to update their beneficiary designations. As a result, their ex-spouse inherits their accounts instead of their current spouse.
  • Children are named as beneficiaries, but legal documents are never updated to include those who were born after the initial designation.

Do beneficiaries need name and address updates made?

Yes! It is important to update beneficiary addresses and/or name changes. For example, when a daughter gets married, her parents need to update her last name. While this particular change is not crucial, it is best to keep your beneficiaries as accurate as possible.

Although solutions can sometimes be found to fix beneficiary mistakes and oversights, most are irreversible. The best way to prevent any of these issues is by simply updating your beneficiaries.

What is essential to my understanding of beneficiaries?

  • Beneficiary designations take precedent over all other legal documents, including your will;
  • Beneficiary forms should be updated every one to two years, or whenever a life-changing event occurs;
  • And finally, beneficiary mistakes are often irreversible.

If we at Kemp Harvest Financial Group can help you in any way with regard to your financial planning needs, please feel free to contact us.

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