Two Important Details That Help Protect Your Financial Plan: Trusted Contacts & Beneficiaries
When it comes to financial planning, many people are diligent about saving, investing, and preparing for retirement. But there are two important details that are often overlooked, and they can have a major impact on your loved ones and the legacy you intend to leave behind: trusted contacts and beneficiary designations.
These items may feel administrative, but they are anything but minor. Keeping them current can help ensure your wishes are carried out smoothly, reduce confusion during difficult times, and provide an extra layer of protection as life changes.
Beneficiary Designations: The Instructions That Often Matter Most
A beneficiary is the person or organization (such as a family member, a trust, or a charitable organization) that will receive the assets in certain accounts, such as retirement accounts and life insurance, when you pass away. In many cases, these designations bypass your will, meaning the assets go directly to the named beneficiaries, often with no probate required. That efficiency can be a gift to families, but it also means beneficiary designations need to be accurate and aligned with your intentions.
Life changes like marriage, divorce, the birth of a child, or the death of a loved one often prompt people to revisit their estate planning documents. However, it’s common to forget that beneficiary designations on accounts such as IRAs and 401(k)s, as well as life insurance policies, must be updated separately. These designations can take legal precedence over what’s written in a will.
To illustrate why this matters, imagine an ex-spouse is still listed as the primary beneficiary on a retirement account. Even if your current spouse or children are your intended beneficiaries, that outdated designation could still control what happens.
Trusted Contacts: A Simple Layer of Protection
In addition to beneficiaries, many financial institutions allow, or even require, you to designate a trusted contact. A trusted contact cannot make financial decisions on your behalf. Instead, they serve as a point of contact if your financial institution suspects fraud, exploitation, or cognitive decline, or if they are unable to reach you when something appears unusual.
Trusted contacts can be especially important as part of broader efforts to protect clients who may be more vulnerable to financial fraud or cognitive changes. Having someone on file provides an added safeguard. If something doesn’t seem right, your financial professionals have a clear, appropriate path to reach someone you trust.
Just like beneficiary designations, trusted contact information can become outdated over time. If the person moves, changes phone numbers, or your relationship changes, it’s important to update the information so they can be reached if needed.
When Should These Be Reviewed?
It’s wise to review your beneficiaries and trusted contacts:
- After major life events (marriage, divorce, birth, death)
- When opening new accounts or purchasing new insurance policies
- Annually as part of a financial review, or at least every two to three years
Most account custodians and insurance providers make it relatively easy to review and update this information, and it often takes only a few minutes. That small effort can spare your loved ones from unnecessary complications later.
Clear Communication Matters
Keeping official records up to date is essential, but so is having open conversations with your loved ones. Make sure your beneficiaries and trusted contacts understand their role and know where to find key documents if something happens to you. Clear communication can help prevent confusion and reduce conflict during emotionally difficult times.
Peace of Mind
Ultimately, keeping your trusted contacts and beneficiaries up to date is an act of care. It helps ensure that your wishes are honored and that your loved ones are protected from avoidable complications. It’s a small but meaningful way to safeguard your legacy and bring peace of mind to those you care about most.
If reviewing trusted contacts or beneficiary designations would be helpful, we’re glad to discuss how these fit into your overall planning. Just reach out to our team and we can talk through next steps.
Means Wealth Management is a registered investment adviser. The information in this material is for educational purposes only and is not intended to act as individualized tax, legal, financial, or investment advice.
