All About Designating Beneficiaries in Estate Planning

Choosing carefully and updating beneficiaries as your life changes, such as after a divorce, are crucial when planning your estate.

An older woman and younger woman in a suit sit at a table and discuss the paperwork that sits before them.
(Image credit: Getty Images)

If you have ever opened a bank account, have a life insurance policy or have started planning your estate, you’ve probably been asked to name a beneficiary or beneficiaries for that account. A beneficiary is a person or entity who receives your assets once you’ve passed away. Designating a beneficiary ensures your assets go where you want them to once you’re gone. But it’s not enough to designate a beneficiary — it’s important to understand how the process works so that you can make the right choices for you and your family.

When designating a beneficiary, there are a few rules you’ll want to keep in mind. First, it’s important to note that a beneficiary has access to an account, or asset, only once you have passed away. For example, let’s say you decide to name your eldest child as a beneficiary over your bank account. That child will not be able to access the account until after you’ve died. This means they can’t get into the account to withdrawal money to help pay their own bills or fund that brand-new car.

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Patrick M. Simasko, J.D.
Partner, Simasko Law

Patrick M. Simasko is an elder law attorney and financial adviser at Simasko Law and Simasko Financial, specializing in elder law and wealth preservation. He’s also an Elder Law Professor at Michigan State University School of Law. His self-effacing character, style and ability have garnered him prominence and recognition throughout the metro Detroit area as well as the entire state.