A beneficiary designation is a legal instruction you give to your bank that names who will receive the funds in your investment or bank accounts upon your death. Beneficiary designations are a useful but often overlooked component of estate planning.

Accounts like IRAs, 401(k)s, life insurance policies, and even some bank accounts allow you to name one or more beneficiaries to receive the account assets upon death. Upon your passing, these funds transfer directly to the designated individuals without the need for a will, probate court, or an executor.

Keeping these designations up to date is essential, especially after major life changes like marriage and divorce. Failing to update them could lead to unintended consequences, such as conflicts with a later will, which may lead to a fight between beneficiaries. Review your beneficiary designations regularly to ensure they align with your overall plan. It’s a simple step that can prevent complications for your loved ones.