If you have an employer-sponsored retirement plan, life insurance policy, annuity, or other retirement account, you probably specified a beneficiary to inherit the proceeds upon your death. Beneficiaries can also be named on brokerage accounts, certificates of deposit, mutual fund accounts, and checking or savings accounts. These accounts become known as payable on death, or transfer on death accounts.
Unfortunately, once the account is established and funded, many of us forget to revisit the beneficiary designations.
What if you divorce or have children? What if one of your beneficiaries passes away? All of these are important reasons to review your beneficiary designations every few years or when there is a significant life event.
In Maryland, divorce revokes all provisions in a will relating to the spouse. However, divorce would not affect the beneficiary designation on an insurance policy or other account. It is important to review all policies and accounts to ensure the beneficiaries are updated following a divorce. therwise, you may be leaving a windfall to an ex-husband or wife.
If your beneficiary passes away before you and you don’t update your beneficiary designations, the secondary beneficiary will inherit, if you’ve named one at all. But if you did not have a contingent beneficiary and your primary beneficiary predeceases you, in most circumstances the account will be paid to the estate and the proceeds will need to go through probate.
If you do have a secondary beneficiary named when the primary beneficiary passes away, the paperwork should still be revisited so that both primary and contingent beneficiaries are designated.
If you rolled over an employer-sponsored plan, such as a 401k or 403b upon separating from the company or retiring, your beneficiary designations do not carry over to your IRA. Whether you’re setting up a new IRA or rolling over the plan into an existing retirement account, the rollover is a good time to ensure that your beneficiary designations are updated.
Other considerations are whether you named a minor child or special needs beneficiary to inherit the account. A minor child should not be designated as a beneficiary, because if they inherit, a guardian or custodian would need to be appointed to manage the property. Often, it is better to establish a trust for the child’s benefit and designate the trustee of the child’s trust as the beneficiary of your account. If a special needs beneficiary inherits money outright, he may become disqualified from receiving public benefits. To avoid jeopardizing the beneficiary’s eligibility, a special needs trust should be established and the trustee of that trust should be designated as the beneficiary of your account.
Perhaps you named beneficiaries before you had children or grandchildren. Though your spouse may be designated as your primary beneficiary, you should determine if adding contingent beneficiaries, such as children or grandchildren, would help achieve your estate planning goals.
An estate planning attorney can assist you in creating or reviewing your estate planning documents, including updating beneficiary designations on your accounts.
- This Holiday Give Your Loved Ones the Gift of Peace of Mind - December 18, 2025
- Understanding the Maryland Medicaid Application: Planned or Urgent We Can Help - December 9, 2025
- Wills Gone Wild; Strange and Funny Bequests from History - November 26, 2025
