Naming the Right Beneficiaries: Common Mistakes That Can Derail Your Plan

You've done the hard work — you've created a will, set up a trust, maybe even bought life insurance. But there's one step that quietly undermines thousands of estate plans every year: outdated or incorrect beneficiary designations.

Many assets — including life insurance policies, IRAs, 401(k)s, and certain bank accounts — pass directly to named beneficiaries, completely outside of your will. This is called a non-probate transfer, and it means your will has no control over these assets whatsoever.

Common mistakes that cause serious problems:

Naming a minor child as a direct beneficiary. Children cannot legally receive large sums of money. If a minor is listed as beneficiary, a court will appoint a guardian of the estate to manage the funds — an expensive, court-supervised process that can last until the child turns 18.

Forgetting to update after divorce. In many states, a divorce automatically revokes beneficiary designations to an ex-spouse — but not always, and not for all account types. Leaving an ex-spouse as beneficiary is one of the most common and costly estate planning mistakes.

Not naming a contingent beneficiary. If your primary beneficiary dies before you and there's no backup named, the asset may pass through probate anyway — defeating the purpose of the designation entirely.

Naming your estate as beneficiary. This routes assets through probate, eliminates creditor protection, and for retirement accounts, eliminates the stretch option for heirs.

The fix is simple: review your beneficiary designations every year and after any major life event — marriage, divorce, birth, or death. This one habit alone can save your family significant time, money, and heartbreak.

📌 When was the last time you reviewed your beneficiary designations? If you're not sure, now is the time. Contact us to schedule a beneficiary review.