Refresh Your Life Insurance Beneficiaries This Spring
Spring naturally inspires us to reset, reorganize, and clear out what no longer serves us. As you tidy up your home, tackle seasonal projects, or sort through old boxes, there’s another area worth putting on your spring-cleaning checklist: your life insurance beneficiary designations.
Outdated or incomplete beneficiary information can create confusion and unintended consequences. In some cases, your loved ones may face delays, legal challenges, or unexpected complications during an already emotional time. Fortunately, a quick beneficiary review is simple—and it can prevent major headaches in the future.
Below, we’ll explore six frequent beneficiary mistakes and how reviewing your designations now can help ensure your wishes are honored exactly as you intend.
Why Beneficiary Designations Carry More Weight Than Your Will
Many people assume their will dictates where all their assets go. But for life insurance policies, retirement plans, annuities, and other transfer-on-death accounts, the beneficiary designation supersedes your will. This means that whatever name appears on that form is who will receive the benefit—no matter what your will says.
For example, even if your will leaves everything to your children, an ex-spouse listed on your life insurance policy will still legally receive the payout. Financial institutions are required to follow the beneficiary designation as written.
That’s why regularly updating your beneficiary forms and making sure they align with your estate plan is essential for protecting the people you care about.
Six Common Beneficiary Mistakes You Can Avoid
1. Not Listing a Beneficiary
If you leave your life insurance policy without a named beneficiary, the benefit usually defaults to your estate. Once that happens, the funds have to go through probate—a public, often slow process that exposes the proceeds to potential creditor claims and legal fees. It can also delay when your loved ones receive the support they need.
By naming at least one beneficiary, you ensure the funds transfer directly to your chosen person privately and efficiently.
2. Forgetting to Remove an Ex-Spouse
Divorce often prompts people to update their will, but many overlook the beneficiary section on their policies. If your ex-spouse remains listed, they may still legally inherit your life insurance payout, even if it contradicts your estate plan.
State laws don’t always guarantee protection against this scenario. The safest solution is updating your beneficiary form promptly after a divorce.
3. Naming a Minor as the Direct Beneficiary
It’s natural to want your children to receive the benefit from your life insurance policy. However, minors cannot legally claim life insurance proceeds. If you pass away before your child becomes an adult, the court must appoint someone to manage the money—someone who may not be the person you would have selected.
A better approach is creating a trust for your child, naming a guardian in your will, and designating the trust as the beneficiary. This gives you control over who manages the funds and how they’re used.
4. Not Accounting for Special Needs Considerations
If one of your beneficiaries relies on programs like SSI or Medicaid, receiving money directly from a life insurance policy could disrupt their benefits. They might have to spend down the funds before regaining eligibility.
In these situations, a special needs trust can be a strategic solution. This type of trust allows you to leave financial support to a loved one with disabilities without interfering with essential public assistance.
5. Overlooking a Contingent Beneficiary
A contingent beneficiary serves as a backup if your primary beneficiary cannot receive the payout. Without a contingent designation, the benefit may once again fall into your estate and trigger probate.
Adding a contingent beneficiary provides an extra layer of protection and ensures your wishes are followed, even when life takes unexpected turns.
6. Ignoring Updates After Significant Life Events
Life moves quickly, and major events—such as births, marriages, divorces, and deaths—can shift your priorities. If you haven’t checked your beneficiary forms in several years, they may no longer reflect your current intentions.
Review your designations at least annually and after any major milestone. Don’t forget to check all your accounts, including your retirement plans, health savings accounts, annuities, and any transfer-on-death accounts. Keeping everything in sync with your estate plan ensures clarity and consistency.
Planning Considerations for Blended Families
Families that combine children and stepchildren often require extra thought when planning beneficiaries. If you’ve remarried but still want to provide for children from a prior relationship, a simple designation may not effectively balance everyone’s needs.
Start with open conversations to clarify your intentions. Some people choose to carry separate life insurance policies—one for a spouse and one for children—to ensure fairness. Others work with an estate planning attorney to create a trust that supports a spouse during their lifetime while ultimately reserving assets for children.
Transparent communication combined with professional guidance can help prevent misunderstandings and reduce the possibility of family conflict later on.
Make Beneficiary Reviews a Springtime Habit
A yearly review of your life insurance beneficiaries is a simple, meaningful step toward protecting your family’s future. By avoiding common mistakes and keeping your designations aligned with your goals, you ensure your loved ones are supported without unnecessary delays or complications.
If you’re unsure where to begin or want help reviewing your forms, we’re here to assist you. A brief conversation today can offer lasting peace of mind.
Let’s set up a quick beneficiary review and make sure your plans reflect your life as it is today.