Beneficiary Designations: Critical to Sleeping Better During Retirement

An estate plan is an important part of any financial plan, particularly so for those in or entering retirement. You've heard plenty about the importance of wills, trusts, and durable powers of attorney. Unfortunately, the most basic part of estate planning, beneficiary designations, is often ignored. On the positive side, it's the easiest and cheapest estate planning element to change.

Beneficiary designations are so critical because they override your will. Here's the typical "big mistake" of beneficiary designations:

Let's say a man participates in his 401(k) account at his job. When he first started, he completed the required beneficiary designation form and selected his wife as his primary beneficiary. Many years later he divorces and, sometime later, remarries. He updates his will but doesn't think of that beneficiary designation form he completed a couple of decades ago. Then he dies. Who gets the 401(k) money? Not his wife, even though his will says everything should go to her. Instead, his ex-wife gets the loot because the beneficiary designation form is what rules the distribution of those proceeds..

Make sure you double-check your beneficiary designations on all your accounts from time to time to ensure they still work they way you'd want them to should you suddenly pass away. You'll sleep better knowing you've taken care of your loved ones.