beneficiary designation
The assignment of who receives account assets upon the holder's death — overrides what a will says.
Example
“Forgetting to update beneficiary designations after divorce meant the ex-spouse inherited the IRA.”
Memory Tip
DESIGNATIONS override wills. Update them after every life change.
Why It Matters
Beneficiary designations ensure your assets transfer quickly to the people you choose without going through probate, which can be slow and expensive. This is one of the most direct ways to control who receives your money after you pass away, making it a critical part of any financial plan.
Common Misconception
Many people believe their will controls who gets their retirement accounts and life insurance proceeds, but beneficiary designations actually override the will entirely. If you name one person on your life insurance form but a different person in your will, the beneficiary designation wins.
In Practice
Suppose you have a 401k worth 500,000 dollars with your ex spouse listed as the beneficiary, but you remarried and want your new spouse to inherit it. Even if your will says your new spouse gets everything, your ex spouse will receive the full 500,000 dollars unless you file paperwork to change the beneficiary designation with your employer or plan administrator.
Etymology
From Latin 'beneficiarius' plus Latin 'designare' meaning to mark out.
Common Misspellings
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See Also
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