How to update your beneficiaries after major life events
Editorial staff, J.P. Morgan Wealth Management
- Updating a beneficiary means logging into your financial accounts like retirement plans, life insurance policies, and bank and brokerage accounts, and submitting a new beneficiary form directly with each institution.
- A beneficiary change on one account doesn’t affect the others, and your will has no power to override what’s on file.
- Marriage, divorce, the birth of a child, the death of a beneficiary or a job change are all major life events when you may want to review your accounts and your beneficiary designation.ncipal.
You might assume a will is enough to control where your money goes when you die. But financial accounts like retirement plans, life insurance policies and brokerage accounts pass to whomever is named as the beneficiary, a designation many people make once and never think to update. Here’s what’s at stake when that beneficiary designation is out of date, when it may be the right time to review and update, and how you can make the changes.
Why beneficiary designations need updating after major life events
Your will doesn’t always control where your money goes when you die. For retirement accounts, life insurance policies and other accounts with transfer-on-death designations, the beneficiary form overrides your will.
For example, an ex-spouse you named as a beneficiary 15 years ago may still be entitled to your 401(k) if you haven’t changed it yet. And if you don’t update your life insurance beneficiary after having or adopting a child, your new baby may get nothing.
Keeping beneficiary designations current can speed up the transfer process, reduce the chances of family disputes and, in many cases, keep assets out of probate entirely.
Life events that can trigger a beneficiary review
A beneficiary designation doesn’t update itself. Here are some of the life events that may prompt you to check your account beneficiaries:
- Marriage or remarriage: You can add your new spouse as a beneficiary. And in blended families, existing designations may no longer reflect how you want assets to be divided.
- Divorce or separation: For life insurance and individual retirement accounts (IRAs), a beneficiary designation often survives divorce unless you actively change it.
- Birth or adoption of a child or grandchild: These new family members can’t add themselves to beneficiary forms, so you may want to make the change on your accounts.
- Death of a spouse, beneficiary or family member: If your named beneficiary dies before you do, you should make a new designation.
- A new diagnosis, disability or caregiving responsibility: Special needs planning requires careful consideration because direct inheritance may affect eligibility for government benefits.
- A job change, rollover or new account: Each new account requires you to name one or more beneficiaries.
- A major asset change: An inheritance, a new life insurance policy or a significant purchase can shift the balance of your estate in ways your current designations might not reflect.
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Where to update beneficiaries: Your checklist of accounts
Updating one account doesn’t update the others. Each account at each institution may have its own form, its own portal and/or its own rules. This list below can help you get started.
Note that bank and brokerage accounts often use payable-on-death (POD) or transfer-on-death (TOD) designations. Like beneficiary instructions, these arrangements can transfer the account directly at death, usually outside of probate.
Account types and where to update your beneficiary
Account type | Where to update your beneficiary |
|---|---|
Workplace retirement plans like a 401(k), 403(b) or 457(b) | Your plan administrator or HR portal |
IRAs | Your IRA custodian |
Life insurance and annuities | Your insurance company or agent |
Bank and brokerage accounts (POD/TOD) | Your financial institution (bank, brokerage, credit union) |
Health savings accounts (HSAs) | Your account administrator |
Most flexible spending accounts (FSAs) don’t allow beneficiary designations the way health savings accounts (HSAs) do. Unused funds typically don’t transfer at death.
Trust and estate planning documents aren’t beneficiary forms, but they still need to align with your designations. If your trust is named as a beneficiary on an account, the trust’s terms control what happens next. Always review the terms and conditions when you update beneficiaries on financial accounts.
Helpful steps to update your beneficiary designations
Knowing you need to update your beneficiaries is the easy part. These steps can help guide you through the general process of how to make the changes:
- Pull together every account: Gather statements, login information and policy documents. If you don’t have a complete list, your most recent tax return – which can include interest, dividends and retirement contributions – may help surface accounts you may have forgotten.
- Choose your primary beneficiaries and set percentages: Allocations must total up to 100%. In blended families or situations with multiple beneficiaries, think through the math carefully before you submit.
- Add contingent beneficiaries: A contingent beneficiary inherits if your primary beneficiary dies before you do, or they can’t accept the funds. Also consider whether a "per stirpes” designation – which passes a dead beneficiary’s share to their descendants – fits your intentions. (In Latin, per stirpes translates to “by roots” or “by branch.”)
- Submit the update and confirm it was processed: Don’t assume a submitted form has been accepted. Follow up with your provider by phone or in writing to verify the change is on file.
- Save your confirmation: Store it with your will, trust documents and estate plan. Tell someone you trust where to find everything.
Before naming a minor or a person with special needs as a beneficiary, consider whether a trust or other legal structure is more appropriate. A direct inheritance can create legal complications or affect eligibility for government benefits. An estate planning attorney can help you think through the right approach.
Special rules and situations to be aware of
Some beneficiary designations may come with legal strings attached. Let’s consider them.
Spousal consent
If you have a 401(k) or other workplace plan covered by federal retirement law (ERISA) and want to name someone other than your spouse as a beneficiary, your spouse may have to consent in writing.
Community property states
In the nine community property states – Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin – your spouse may have a legal claim to half of any assets acquired during the marriage, regardless of what your beneficiary form indicates.
Naming a minor directly
A court may need to appoint a guardian to manage inherited assets until the child reaches adulthood. Custodial accounts or trusts are common solutions.
Common mistakes to avoid
Beneficiary forms can be easy to file, but mistakes can still happen. Here are some common examples:
- Updating your will but not your beneficiary forms: A will doesn’t override a beneficiary designation, even if the latter hasn’t been updated in years.
- Forgetting to name beneficiaries after a job change or rollover: Rollovers and new accounts don’t inherit your old designations.
- Skipping contingent beneficiaries: If your primary dies before you do and there’s no backup named, the account may end up in probate.
- Naming “estate” as the beneficiary: This is sometimes a default, but you have other options that may be better for your situation. Assets left to an estate go through probate and lose the speed advantage of a direct beneficiary designation.
- Not reviewing beneficiaries after a major life event: Divorce, remarriage or the death of a beneficiary can render an earlier designation outdated.
- Missing details: A name without a date of birth or Social Security number can slow down or otherwise complicate things.
The bottom line
Beneficiary designations are consequential documents, but most people never think about them more than once. Compared to a will, beneficiary designations can facilitate faster transfer of money, but they can also benefit the wrong person if they fall out of date. Periodically checking your designations takes little time and can prevent costly mistakes.
Frequently asked questions about updating your beneficiary
As soon as possible. For divorce, don’t assume the separation or court filing takes care of it. In many states, a beneficiary designation on a life insurance policy or retirement account survives divorce unless you change it. Update beneficiary forms as soon as your circumstances change.
Generally, yes. Federal law requires spousal consent in writing if you want to name someone other than your spouse as the primary beneficiary of a 401(k) or other ERISA-covered workplace plan.
It depends. A trust can make sense if you have minor children, a beneficiary with special needs or a blended family situation that requires more control over how assets are distributed. But a trust adds complexity. Talk to an estate planning attorney before naming a trust as a beneficiary on any retirement account.
A primary beneficiary is first in line to inherit. A contingent beneficiary inherits only if the primary beneficiary dies before you or otherwise can’t accept the funds. Without a contingent beneficiary on file, an account may pass through probate if your primary beneficiary has passed away.
The account typically passes to your estate, which means it goes through probate, a court-supervised process for distributing assets to heirs. The probate process can be time-consuming and costly, especially compared to what could have been a simple transfer to a named beneficiary.
Yes. When you roll over a 401(k) or open a new retirement account, the new account starts with no beneficiary on file. Your old designation doesn’t transfer. Log into the new account or contact the custodian after any rollover or job change to make sure the right people are named.
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Editorial staff, J.P. Morgan Wealth Management
