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Writer's pictureKimberly Hegwood

What Will Happen if I Don’t Update my Beneficiaries?

Updated: Aug 27


This is a very important step in estate planning because at your death, certain assets pass to beneficiaries named on your accounts. It doesn’t matter if someone else is named as the recipient of your assets in your will!

Let’s look at one of the big implications of failing to review your beneficiaries.


The Ex-Spouse


The New Hampshire Union Leader explains in “The law determines your beneficiaries unless you intercede,” that even though New Hampshire has a lower divorce rate than the national average, if you’re recently divorced, you need to do some fast estate planning. The divorce decree you signed doesn’t automatically terminate your ex’s beneficiary designation on separate documents like your employer-sponsored retirement accounts, IRAs, and life insurance policies. If your former spouse remains as the beneficiary on an account, he or she will most likely inherit those assets instead of your children or your new spouse.


Let’s take that a step further: Even without a divorce, there can be unintended implications for your money after your death. If, in your retirement plans, you named your spouse as the primary beneficiary, he or she has the right to transfer all or part of the retirement assets into his or her own IRA account after your death. The surviving spouse is entitled to then name the children from a previous or future marriage as beneficiaries once it is his or her own money. Something like that could result in the original IRA owner’s children being legally cut out of any benefits.


Spousal Waiver


Spousal rights laws say that your spouse must be the primary beneficiary of a 401(k) or profit-sharing account. Your spouse can waive this requirement in writing so that other estate planning strategies can be implemented. A spouse who is financially independent and wants to earmark the account for philanthropic pursuits may want to use the waiver; or where children from a first marriage are more likely to need the money. If you’re unmarried, you can name whomever you want as the primary beneficiary.


Tax laws also detail how retirement plan assets must be distributed to your beneficiaries at your passing, but if this is done properly, your beneficiaries may be allowed to continue the tax deferral for some time. Note that these rules are complicated and change frequently, so you should discuss them with an experienced estate planning attorney.


It is important to be certain that your intended beneficiary designations are in sync with your estate documents. To ensure that this is the case, visit your estate planning attorney. Your attorney will help with terms like “per stirpes” and “per capita.” A qualified trusts and estates lawyer can also help you deal with planning for minor children and those with special needs.


Reference: The New Hampshire Union Leader (January 24, 2016) “The law determines your beneficiaries unless you intercede”


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