The Joseph Group

Beneficiary Designations and Potential Pitfalls

June 23, 2023

To Inform:

“Nothing is simpler than greatness; indeed, to be simple is to be great.” – Ralph Waldo Emerson.

The concept of simplicity is one that we strive to help all of our clients achieve. One key way to simplify your financial life involves regularly reviewing and updating your beneficiary designations. Beneficiary designations done well lead to a simple and elegant estate process, but beneficiary designations done poorly (or not at all) lead to a complicated, time-consuming estate process that can be filled with unintended consequences. The best way to start to update your beneficiaries is to consolidate accounts across various financial firms.

So, what is our system for understanding and organizing various accounts? First, if you can consolidate accounts with one financial firm, do so. It is much easier to update beneficiaries at one firm versus beneficiaries at multiple financial institutions. Once you have consolidated accounts across various firms, make a list. List all financial accounts and make sure the following beneficiary designation is added.

  • Checking / Savings Accounts – payable on death beneficiary designation
  • Brokerage Accounts – transfer on death beneficiary designation
  • IRAs, including Traditional, Roth, SIMPLE and SEP IRAs – IRA beneficiary designation
  • 401(k), 403(b) and other retirement plan accounts – qualified plan beneficiary designation
  • Annuities – annuity beneficiary designation
  • Life insurance policies – beneficiary for death benefit
  • Real estate – transfer on death for real estate beneficiary designations

Once you have a list that is specific to your situation, take time to run through each account and find out who, if anyone, is listed as the beneficiary. If no one is listed, find out what the process is for listing your intended beneficiary on the account. Keep good records of who is currently listed and the last time you went through and checked. We recommend that these be reviewed when big life changes happen, for example: marriage, death, divorce, or having a baby. While helping clients process the estates of loved ones, this step is crucial for a strong starting point to begin the asset transfer.

But we still haven’t answered the question of why we should make sure we have proper beneficiaries on these accounts?

Potential Pitfalls of Outdated/Missing Beneficiary Designations:

  • Not naming a beneficiary at all. This is more common than you think. At the time of the account set up, if you are not required to add a beneficiary, there is a good chance that you will forget to do so.
  • Probate is expensive! If no beneficiaries are listed on the account, the assets will become part of your estate and will be subject to the probate process. Probate is a costly process and will hold up processing of asset transfers to desired heirs.
  • Specific requests may not be followed. Having a beneficiary listed on the account will supersede a will which means that outdated beneficiaries could lead to the account holder’s wishes not being followed.

To sum things up, if you are looking to create simplicity in your life, consolidate your various investment accounts into one financial firm. This is the first step in making your picture more manageable. Second, make a list of all your financial accounts and double check that they have the correct intended beneficiaries on them, and remember to update these when any big life changes happen.

We are passionate about helping you create a simplified life. Let us help if you need assistance getting started! Remember, it may take a little time now, but the reward of organization and understanding are more than worth it.





Written by Theresa LeChard, Wealth Advisory Associate