Signing up for life insurance and a 401(k) can be an important part of your estate plan. These assets allow you to designate someone to receive the proceeds from the account or insurance policy. However, you will likely have to revisit your choice of beneficiary later on.
It can be easy to put your accounts out of your mind as years pass. The problem is that various life events could make it imperative to change who gets a payout from your assets.
After a wedding
People who are young and have no families of their own may name their parents as beneficiaries. Once you have a spouse, you should consider updating your beneficiary. Sometimes people forget about their beneficiary designations and fail to put their spouse on an account even after many years have passed.
Following a divorce
A divorce settlement can divide up assets between you and your spouse but it cannot change the beneficiary on your accounts. So if you have named your spouse as a beneficiary, your ex can still receive payouts from you if you do not change the designation after your divorce.
When you have descendants
If you manage to enjoy a long life, you will have several life events to possibly account for. You may have one or more children, so you probably want to name them as your beneficiaries. However, once they become legal adults, they might no longer need payouts that applied to them when they were minors. You could also have grandchildren and want to shift a payout to them.
Your choice of beneficiary can change often over the course of your life, so prepare to do so multiple times if necessary.
