What Happens if You Forget to Update Your Beneficiary?

Life changes fast. Marriages, divorces, new children, career shifts, and losses all affect how we plan for the future. One detail that often gets overlooked during these transitions is updating beneficiary designations. It may seem minor, but forgetting to update a beneficiary can lead to serious financial and emotional consequences.

What Is a Beneficiary and Where It Applies

A beneficiary is the person or entity you name to receive assets after your death. Beneficiaries are commonly assigned on life insurance policies, retirement accounts like 401(k)s and IRAs, pensions, payable-on-death bank accounts, and investment accounts.

These designations are powerful. In most cases, beneficiary forms override what is written in a will. That means even a carefully drafted estate plan can be undone by an outdated beneficiary designation.

What Happens When Beneficiaries Are Outdated

If you forget to update your beneficiary, the asset typically goes to the person listed on the account, regardless of your current wishes. For example, an ex-spouse may still receive a life insurance payout even if you remarried, unless the designation was changed.

This can create financial hardship for your intended heirs and spark conflict among surviving family members. It may also result in lengthy legal disputes, especially if your will names someone different from the beneficiary form.

What If No Beneficiary Is Listed

If no beneficiary is named, the asset usually becomes part of your estate. This often means it must go through probate, a court-supervised process that can be time-consuming and expensive. Probate can delay access to funds for months or even years and reduce the overall value of the asset due to legal fees and court costs.

Additionally, assets that go through probate are distributed according to state law or your will, which may not align with your original intentions.

Tax and Financial Implications

Outdated beneficiary designations can also create unexpected tax consequences. Retirement accounts, in particular, have specific distribution rules that depend on who inherits them. Naming the wrong person, or failing to update beneficiaries after major life events, can result in higher taxes or less favorable payout options for your heirs.

For families relying on life insurance or retirement funds for immediate financial support, delays or disputes can be especially damaging.

Discover: How to Minimize Taxes in Your Estate Plan

Common Life Events That Require Updates

Beneficiary designations should be reviewed after major life changes, including marriage, divorce, birth or adoption of a child, death of a beneficiary, or significant changes in financial goals. Even if nothing major has changed, it is wise to review designations every few years to ensure they still reflect your wishes.

Read more: 10 Reasons to Revise Your Estate Plan

Final Thoughts

Forgetting to update your beneficiary is one of the most common and costly estate planning mistakes. A quick review of your accounts can prevent confusion, conflict, and unintended outcomes for the people you care about most. Taking the time to keep beneficiary designations current is a simple step that can make a lasting difference in protecting your legacy and providing peace of mind for your loved ones.

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