Beneficiary Designations: Why Keeping Them Updated Matters

David Peters
May 21
4 min read

When it comes to financial planning, many people focus on building savings, preparing for retirement, and protecting their loved ones. One important detail that can sometimes be overlooked is beneficiary designations.

Beneficiary designations are a key part of account documentation and can play an important role in how certain assets are transferred after death. Understanding how they work, and reviewing them regularly, can help ensure your wishes are clearly reflected across your financial accounts.

What Is a Beneficiary Designation?

A beneficiary designation is a formal instruction that identifies who should receive the assets in a specific financial account or insurance policy upon the account owner’s death.

Rather than relying solely on instructions outlined in a will, certain accounts allow you to name one or more beneficiaries directly through the account provider. This designation typically determines who receives the funds, often allowing assets to transfer more efficiently.

Beneficiary designations are commonly used as part of broader estate planning and retirement planning strategies.

Types of Accounts That Allow Beneficiary Designations

Several types of financial accounts and policies may include beneficiary options, including:

Retirement Accounts

Retirement accounts often require or allow beneficiary designations, including:

• Traditional IRAs

• Roth IRAs

• 401(k) plans

• 403(b) plans

• Pension plans

Because retirement accounts often contain significant long-term savings, keeping beneficiary information current is especially important.

Life Insurance Policies

Life insurance policies typically require beneficiaries to be named when the policy is established. These designations help determine who receives the policy proceeds upon the insured person’s death.

Transfer-on-Death (TOD) Accounts

Some brokerage accounts, bank accounts, and investment accounts may offer transfer-on-death (TOD) or payable-on-death (POD) designations. These arrangements allow assets to pass directly to a named beneficiary, subject to the terms of the account and applicable law.

Primary vs. Contingent Beneficiaries: What’s the Difference?

When completing beneficiary forms, you may be asked to name both primary and contingent beneficiaries.

Primary Beneficiaries

A primary beneficiary is the first person (or people) designated to receive the account assets.

You may choose:

• One individual

• Multiple individuals with percentage allocations

• A trust or legal entity, depending on the account rules

Contingent Beneficiaries

A contingent beneficiary serves as a backup. They may receive the assets if the primary beneficiary is unable to inherit or predeceases the account owner.

Naming contingent beneficiaries can help provide additional clarity and reduce complications during account settlement.

Beneficiary Designations vs. Your Will

One common misunderstanding is assuming that instructions in a will automatically control every asset.

In many cases, beneficiary designations may supersede instructions in a will for accounts that have designated beneficiaries. This means the financial institution may distribute assets according to the beneficiary form on file, even if your will states something different.

For this reason, beneficiary forms should be reviewed as part of any broader estate planning checklist to help ensure consistency across your financial documents.

Why It’s Important to Keep Beneficiary Information Updated

Life changes and your beneficiary designations should keep pace.

It may be worth reviewing your account information after major life events such as:

Marriage or divorce
Birth or adoption of a child
Death of a beneficiary
Changes in family relationships
Significant financial changes

Outdated beneficiary information can create confusion or unintended outcomes, making regular account reviews an important part of maintaining your overall financial plan.

A Simple but Important Financial Planning Step

Beneficiary designations may seem like a small administrative detail, but they can have a meaningful impact on how financial assets are transferred.

Taking time to review retirement accounts, life insurance policies, and transfer-on-death accounts can help ensure your documentation reflects your current wishes and aligns with your broader financial goals.

How Peters Financial Can Help

As part of a comprehensive financial planning process, Peters Financial can help you review your accounts and identify areas where beneficiary information may need attention. While we do not provide legal advice or draft estate planning documents, we can work alongside your attorney and tax professionals to help ensure your financial accounts are coordinated with your overall plan.

Our team believes that thoughtful planning often comes down to the details and beneficiary designations are one important piece of building a more organized and confident financial future.

About the Author:

David Peters, CPA, CFP, ChFC, CLU, CPCU, CGMA, is the Founder and Owner of Peters Professional Education (petersprofessionaleducation.com) and Peters Tax Preparation & Consulting, PC. David Peters is also registered with the U.S. Securities and Exchange Commission (SEC) as an Investment Advisor Representative (IAR) with Peters Financial LLC. He regularly teaches courses in accounting, finance, insurance, financial planning, and ethics throughout the United States, and regularly contributes regularly to various professional publications, including NCACPA’s Interim Report, SCACPA’s CPA Report, and VSCPA’s Disclosures.

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The content presented above is for informational purposes only, is general in nature, and is not intended to and should not be relied upon or construed as financial, investment, or estate planning advice. This does not constitute an offer to sell or a solicitation to buy any security, investment or planning product. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal. Please consult with a financial advisor to assess your individual situation.

Peters Tax Preparation & Consulting, PC is affiliated with Peters Financial LLC through common ownership. Clients or prospective clients are never obligated to use Peters Tax Preparation & Consulting, PC. as part of any financial planning or investment management services offered by Peters Financial LLC.