Annual Estate and Beneficiary Review for Investors

Why do beneficiary designations override a will?

Retirement accounts (IRAs, 401(k) plans, 403(b) plans), life insurance policies, and annuities pass assets directly to named beneficiaries outside of the probate process. The institution is legally required to distribute the account to whoever is named, regardless of what a will says. If a will says "leave everything to my daughter" but an IRA still names an ex-spouse as beneficiary, the IRA goes to the ex-spouse.

This makes beneficiary designations one of the most important, and most frequently neglected, parts of financial planning. Common failure modes include:

• Failing to update designations after marriage, divorce, or the death of a named beneficiary
• Naming a minor child directly (minors generally cannot receive assets directly; a custodian or trust is usually needed)
• Leaving the primary beneficiary field blank, which often defaults to the estate and forces probate
• Not naming contingent (secondary) beneficiaries, leaving no clear path if the primary beneficiary predeceases you

Bank accounts and taxable brokerage accounts do not automatically have beneficiary designations, but can have payable-on-death (POD) or transfer-on-death (TOD) designations added. These work the same way: assets pass directly to named individuals outside of probate.

What does the annual estate review checklist include?

Work through each item once per year, and immediately after any major life event:

1. Retirement accounts (401(k), IRA, Roth IRA): Verify both primary and contingent beneficiaries. Contact the plan administrator or log into the account's online portal to confirm current designations.
2. Life insurance policies: Verify both primary and contingent beneficiaries on each policy, including employer-provided group life insurance, which is frequently overlooked.
3. Annuities: Verify beneficiary designations, including for any deferred annuities held inside an IRA or outside of one.
4. Bank accounts: Confirm that payable-on-death designations are current at each bank. Not all banks add these automatically; they typically require a separate form.
5. Brokerage accounts: Confirm transfer-on-death designations are in place and current. Accounts held in joint tenancy with right of survivorship pass differently than TOD accounts.
6. Will: Confirm the will reflects your current wishes and family structure. A will drafted before a marriage, divorce, or birth of a child may not reflect your current intent and may need to be updated with an attorney.
7. Durable power of attorney: Confirm that the named agent is still appropriate and willing to serve, and that the document is current. Some institutions treat older power-of-attorney documents with skepticism and may require a more recent one.
8. Healthcare directive (living will): Confirm that the document reflects your current medical wishes and that your healthcare proxy is aware of it and knows where to find it.
9. Trusted contact designations: Confirm that each financial institution has a current trusted contact on file. This is a person the institution may contact if there are concerns about your welfare or potential financial exploitation, without giving them access to your accounts.
10. Digital assets: Confirm that your executor or attorney knows how to access important digital accounts (email, financial accounts, cryptocurrency, subscription services). Passwords and access instructions should be stored securely, not in the will itself (which becomes a public document at probate).

How often should you update estate planning documents?

The standard guidance is to review estate planning documents annually and to update them promptly after major life events. Triggering events include:

• Marriage or divorce
• Birth or adoption of a child or grandchild
• Death of a named beneficiary, heir, executor, or agent under power of attorney
• Significant increase or decrease in assets
• Acquisition or sale of real property, particularly in multiple states
• Moving to a different state (estate law varies by state)
• Change in federal or state estate tax law
• A change in relationship with a named beneficiary or agent

Many investors review beneficiary designations at the same time each year, such as when reviewing tax documents or doing an annual portfolio review. Tying the review to an existing annual habit makes it less likely to be skipped.

Frequently Asked Questions