Can I Change My Beneficiary? The Process Explained

A beneficiary is an individual or entity designated to receive assets or benefits from a financial arrangement, typically upon the death of the asset owner. This designation plays a significant role in estate planning, ensuring that assets are distributed according to an individual’s wishes. Most financial accounts and policies allow for beneficiary changes, providing flexibility as life circumstances evolve. Updating these designations is important for managing one’s estate and ensuring assets are distributed as intended.

Understanding Beneficiary Designations

Beneficiary designations ensure specific assets are transferred directly to chosen recipients, often bypassing the lengthy and costly probate court process.

Many types of financial products and accounts allow for direct beneficiary designations. Life insurance policies, for example, distribute death benefits directly to named beneficiaries. Retirement accounts, such as 401(k)s and IRAs, also rely on beneficiary designations to determine who inherits the funds. For bank accounts, Payable-on-Death (POD) designations allow funds to transfer directly to beneficiaries, while investment accounts may use Transfer-on-Death (TOD) designations for similar purposes.

Within these designations, individuals can name both primary and contingent beneficiaries. A primary beneficiary is the first in line to receive the assets. If the primary beneficiary is unable or unwilling to receive the benefits, the contingent beneficiary is then entitled to them. This layered approach provides a fallback plan, ensuring assets are distributed even if the initial choice cannot inherit.

It is important to recognize that beneficiary designations often supersede instructions found in a will. This means that for assets with a direct beneficiary designation, the named beneficiary on the account or policy will receive the asset, regardless of what a will might state. While a will generally governs the distribution of other estate assets, beneficiary designations provide a direct path for specific financial instruments.

Steps to Change a Beneficiary

Changing a beneficiary designation begins with identifying the institution holding the asset. This could be an insurance company, a bank, a brokerage firm, or an employer-sponsored retirement plan provider.

Once the institution is identified, the next step involves obtaining the correct “Change of Beneficiary” form. These forms are typically available through the institution’s website, by contacting their customer service department, or for employer-sponsored plans, through the human resources department. It is important to secure the specific form relevant to the account type, such as a life insurance policy or a retirement account.

Accurately completing the form is important to ensure the changes are properly recorded. This typically requires providing the full legal names of the new beneficiaries, their relationships to the account holder, and often their Social Security numbers or Tax IDs. If multiple beneficiaries are being named, the form will also require specifying the percentage of the asset each beneficiary should receive.

After completing the form, review it carefully for any errors or omissions. The form will need to be signed by the account holder, and in some cases, a witness or notarization may be required to validate the signature. Submission methods vary by institution and may include mailing the original form, submitting it through a secure online portal, or delivering it in person to a branch office or HR department.

Follow up with the institution to confirm the change has been processed and recorded correctly. Keeping a copy of the submitted form and any confirmation receipts is good practice. Some institutions may provide written confirmation as proof of successful completion.

Important Considerations for Beneficiary Changes

Certain circumstances introduce specific requirements or complexities when changing beneficiaries. For some retirement accounts, particularly those governed by the Employee Retirement Income Security Act (ERISA) like 401(k)s, spousal consent may be required to designate someone other than a spouse as a primary beneficiary. This consent typically involves the spouse signing a waiver, relinquishing their right to the benefits.

Another consideration is “irrevocable beneficiaries.” An irrevocable beneficiary designation means that the account holder cannot change the beneficiary without that beneficiary’s written consent. This type of designation is far less common than a revocable one but makes future changes very difficult without the named beneficiary’s agreement.

Naming a minor directly as a beneficiary presents challenges, as minors generally cannot directly control inherited assets until they reach the age of majority. Common alternatives include establishing a custodial account under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). Another option is to name a trust as the beneficiary, with specific instructions for managing assets for the minor until they reach a designated age.

Major life events require a review of existing beneficiary designations. Marriage, divorce, the birth or adoption of a child, or the death of a previously named beneficiary should prompt a review. Failing to update beneficiaries after such events can lead to unintended consequences, where assets may be distributed contrary to current wishes. Regular review, perhaps every three to five years, even without a major life event, helps ensure designations remain aligned with an individual’s estate plan.