Naming a beneficiary is one of the easiest – but most important – steps you can take to help ensure your legacy is honored and your loved ones are taken care of. But it’s up to you to keep things in order.

Here are four ways to properly care for your beneficiaries.

1. Be sure to name your beneficiaries

In the big picture of successful financial planning, naming a beneficiary is possibly one of the simplest steps you can take. Typically, it’s just a small section on a form asking for information about the person or people who will be receiving an inheritance after you pass. Unfortunately, though, many people don’t take the time to name their beneficiaries. As a result, this can make things very challenging for those who remain after you pass.

Without a beneficiary designation, the financial company holding your assets must follow its own rules or the state rules about where the assets will go after you pass. Here is a brief look at what might happen if you don’t take care of your beneficiary designations:

  • For retirement benefits, there are different rules for married and non-married account holders. If you're married, your spouse will most likely receive the assets. If you're not married, the retirement account will likely be paid to your probate estate. In that case, the beneficiary of your retirement plan assets is required to withdraw all of the money within 10 years. If they fail to do so, they may be subject to a 50 percent excise tax on the remaining balance.
  • For life insurance, the proceeds will typically be paid to your probate estate. This likely means your family will need to hire a lawyer, go to court and probate your estate to claim the proceeds.

 

2. Take care to name your beneficiaries correctly

It’s good advice to take care when naming beneficiaries – not because certain beneficiaries don’t deserve the inheritance, but because it’s critical to correctly input their information. For example, if a family has more than one person with the same name, be sure to specify which person you’re referring to. If necessary, use identifiers like Sr. or Jr. Birthdate and Social Security Number are also helpful.

By properly identifying your beneficiaries, you help ensure there will be no delays in payouts or, in a worst-case scenario of two people with similar names, confusion and possibly litigation.

 

3. Update for life events

Beneficiary designations are an important part of your overall financial plan, so you want to make sure your selections are updated as necessary. Review your beneficiary designations regularly and make changes for life events like births, deaths, marriages and divorces. In instances like this, updating your beneficiary information creates clarity and helps avoid issues when your assets are distributed.

 

4. Review with legal and financial professionals

Many assets that transfer by beneficiary designation, such as retirement plans or life insurance policies, have unique tax rules. So, even though it’s possible to come to an answer on your own, having a trusted financial professional by your side can help make sure your approach is the best one for your specific situation.

According to a recent Corebridge survey1, those who work with a financial professional are nearly twice as likely to feel confident in their ability to plan for a successful future than those who don't (53 percent versus 28 percent).

 

One final thought

Beneficiary designations help ensure you have the ultimate say over who will get your assets when you are gone. By taking the time to carefully – and correctly – name your beneficiaries, periodically review those choices and make any necessary updates as time goes by, you stay in control of your money even after you’re gone.