Justin Jeppesen: Beneficiary Designations on Your Financial Accounts

Why would an attorney write about Beneficiary Designations if there is no money to be made from it? Because, beneficiary designations on your financial accounts are an all too often overlooked aspect of your Estate Plan.

They are often overlooked in these three specific instances; importance (ie controlling authority), updated, or not completed.

What are they? Answer, they give you the ability to dictate who should receive your asset when you die.

What assets do they control and where do you find these beneficiary designations? Answer, you find them on your life insurance policies, brokerage accounts, IRAs, 401ks, and even your checking & savings accounts at your local bank (although at the bank beneficiary designations are often called Payable on Death (P.O.D.) or Transfer on Death (T.O.D.)).  


Since the account is held by a specific financial institution, they are at risk to ensure your belongings are held for you and then distributed to whoever you select when you pass away. Beneficiary designations are what are called the “controlling authority” over that asset. Simply put, you could specifically state in your Will or Trust that your bank account #123456789 at Wells Fargo is to go to your surviving spouse. You beneficiary designation at the Bank states that account #123456789 goes to your children evenly. Guess who legally gets it. If you answered the kids, you are correct.


This one builds off of the point of not understanding the importance of beneficiary designations. When major life events change your personal relationships, ie marriage, births, divorce, death, hopefully you are thinking about how this new challenge in life affects your current estate plan. Most of the time you don’t think about that, let alone those pesky, but useful, beneficiary designations. Please do. Later I will write about beneficiary designations horror stories that can haunt your family if you fail to look at these.*


This one happens less often than the first two, ie understanding their importance and keeping them updated. Not completing a beneficiary designation is not always an evil to avoid (please note that IRAs and 401ks have additional concerns**). If you don’t have someone to designate the account to, the account holder will revert to your Estate as the owner and it will pass according to your Will or your Intestate Succession. The one caveat to this is that if your estate was not previously “probatable,” not having your beneficiary designation updated could trigger a mandatory Probate.

*Although you can’t classify this as a beneficiary designation, the most frequent failure to update occurs with real estate and trusts. Do you think that you are guaranteed to avoid Probate because you have a trust? Noooooooooooooooooooooooooooooooooooooooooooooooooooooooooo. A trust affords you the ability to avoid Probate, but ownership of assets must be held by the trust. So, your most recent real estate purchase that was made in your individual name will trigger Probate if you die before correcting it.

**IRAs and 401ks are great retirement savings vehicles, but are rife with pitfalls. I encourage you to contact your Financial Advisor to discuss the importance of having your tax deferred accounts updated. If you don’t have a Financial Advisor, I will gladly refer you to one.

If you want to discussion your entire Estate Plan with a Meridian Lawyer that cares, including Wills, Trusts, Powers of Attorney and these very important Beneficiary Designations, then I invite you to contact Jeppesen Law and we can get started covering your bases. 208-477-1785 or Contact Us.