Have assets such as 401(k) retirement accounts, IRAs and/or life insurance? Naming a beneficiary for each account or policy is important because it allows key assets to transfer directly to your heirs if something should happen to you, without probate. Sounds great, right? Here’s the problem: People often name beneficiaries when they establish their accounts — and fail to update them over time.
Failing to update your beneficiaries after a divorce can create some huge financial problems. For example, an ex-spouse listed as a beneficiary would be entitled to all the money in a retirement account. There have been numerous nasty lawsuits nationwide involving outdated beneficiaries. In some cases, a child is inadvertently left out because they were born after beneficiaries were named.