Keeping Beneficiaries Up To Date

Why is it important to keep beneficiary information up to date? Learn why keeping beneficiary information up to date is helpful for everyone involved.

Beneficiaries are an important, but often an under-talked-about aspect of financial security. We get it. It’s incredibly difficult to consider planning in the event that something happens to you or your loved ones. It’s an emotional topic, and thinking about the financial aspect of this situation may seem uncomfortable. However, the significance and the difficulty of navigating the passing of someone you love is exactly why beneficiaries are important! Taking the time to keep them up to date when everyone is healthy and times are stable will save you from the extra layers of complication and difficulty that come from navigating financial logistics after someone has passed away.

As a beneficiary, you may have been named in a life insurance policy, retirement plan, or another financial account. This means that you are entitled to receive the benefits or assets of that account when the account holder passes away. On the flip side – if you have an insurance policy, retirement plan, or financial account, you will assign a beneficiary to receive the benefits you’ve been paying into for the duration of the account. It's important to keep your beneficiary information up to date on both sides of this equation. That way, you can ensure that everyone in your life receives the correct benefits and assets.

Here are a few reasons why you should keep all beneficiary information up to date:

Avoid delays and complications:

If your beneficiary information needs to be updated, your loved ones will likely experience delays and complications when it comes to receiving assets. For example, it’s common for spouses to name each other as a beneficiary. If either (or both) partners divorce and remarry and forget to update their beneficiary information – confusion and disputes may be common. Generally, when there are no disputes, and everything is clearly outlined, beneficiaries will receive assets from insurance companies within 30-60 days of filing a claim. However, when claims are contested, it could quickly become a months-long process, with many disputes taking up to a year to resolve. If your loved ones rely on these assets for financial security, this could put them in a precarious position.

Also, remember that contested claims and disputes are not the only reasons the life insurance payments may be delayed. The insurance company has a period during which they can investigate the claim. Suppose they find the insured party passed away during an illegal activity, lied on their initial application, or omitted health conditions or risky behaviors. In that case, payment can be delayed and, in some instances, denied.

Ensure your wishes are honored:

If you have specific wishes for how your assets should be distributed after your death, keeping your beneficiary information up to date is essential. In general, most life insurance policies and retirement accounts will allow you to designate more than one beneficiary. You can identify what percentage of your assets you would like to distribute to each beneficiary. This can be especially helpful in distributing assets when children are involved. For example, suppose you have children from a previous marriage. In that case, you may want to name them as beneficiaries to ensure they receive a portion of your assets regardless of whether your former spouse is also listed.

Protect your loved ones:

Maintaining up-to-date beneficiary information is the only way to make sure your assets go where you intended. In many cases, the beneficiary listed on an insurance policy or retirement plan will override a will in the event of differing instructions. No one wants to deal with the hassle of sorting through complicated financial bureaucracies after someone they love passes away. Still, some people, like children who are minors, may not be able to navigate this process.

Something else to keep in mind? They also may not be in a position to manage the assets on their own once they are disrupted too. Suppose you have listed a minor beneficiary when the assets are distributed. In that case, they may need a designated guardian responsible for managing these finances until they are old enough to do so themselves. Legal requirements around this differ by state, so if minors are involved or you have a complicated beneficiary situation, reach out to a lawyer to advise you on your options.

Save time and money:

By keeping your beneficiary information up to date, you can save your loved one’s time and money in the long run. If your beneficiary information needs to be updated, it may require legal intervention to sort out the distribution of assets. In fact, most insurance companies do not play a role in handling disputes. They will likely wait for each party to agree through mediation or arbitration before distributing the benefits or assets. This can be a costly and time-consuming process that can be avoided by keeping your beneficiary information current.

In summary, check your beneficiary information regularly. And check in with those who have listed you as a beneficiary. Keeping this information up to date will ensure that your wishes are honored, your loved ones are protected, and the distribution of your assets is carried out as smoothly as possible. It's a simple step that can save time, money, and potential heartache down the line.

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