There is a common misconception regarding beneficiary designations. The person you list on your beneficiary designation for a life insurance policy, retirement account, or bank account will receive that asset regardless of what you have in your Will.

In fact, your beneficiary designations avoid Probate. By avoiding Probate these assets go directly to the beneficiary listed. It is possible for this asset to pass through Probate.

If you list your Estate as beneficiary or if the person listed (and contingent beneficiaries) are deceased the asset will not avoid Probate. This substantially increases the costs of administration and makes the asset subject to creditor claims.

Updating  Beneficiaries

The most common estate planning mistake is to have an out-of-date beneficiary designation. For example, if you are recently married (or divorced) you may not have updated your beneficiary designations. Even if you updated your Will to add (or remove) a spouse the beneficiary designation controls who receives the asset.

Review your beneficiary designations regularly to ensure the provider has the correct person listed. You can consult with your human resources department or financial advisor to verify your designations are up-to-date.