Here’s a pop quiz: if I asked you right now to name the beneficiaries on your retirement accounts, could you do it? If not, consider this brief cautionary tale: a man named Jeffrey Rolison died in 2015, and his estate lost $1 million to an ex-girlfriend because he never updated the beneficiary on his old 401(k) after they split. It didn’t matter that they broke up way back in 1989. She was still listed as the sole primary beneficiary on the account.

What many people don’t realize is that retirement accounts like 401(k)s and IRAs won’t just pass automatically to any heirs named in your will. That’s right, no matter what your will says, the money will go directly to the beneficiaries named on those accounts (unless a court intervenes). Spouses have the right to be the primary beneficiary under federal law, but if they aren’t listed as the primary beneficiary and the employer doesn’t know about them, they will have to prove to the plan administrator that they are the surviving spouse or possibly go to court to get access to the money. (In Jeffrey Rolison’s case, he wasn’t married when he died, making things more complicated for his estate.)

This isn’t just one-off drama—it’s a widespread issue. Too many individuals forget to update their beneficiaries after major life changes like marriages, divorces, or the birth of a child. The consequences? Just like in Jeffrey’s case, assets may end up in unintended hands. Even when his estate sued his old employer, the court still upheld the original beneficiary designation – even though it was written on paper back in 1987!

This is a common and costly mistake that can cause a lot of unintended heartache and legal headaches for your loved ones.

So, what can you do? Take a moment to review your beneficiary designations today—including adding contingent beneficiaries, such as a child or a trust, if you have one. And if you need help ensuring everything reflects your current wishes, visit pinskerwealth.com to schedule a complimentary call with us. Let’s make sure your financial legacy is exactly as you intend it, so that you don’t create unintended consequences for your loved ones.

Want to learn more? Read about the differences between Pro Rata vs. Per Stirpes beneficiary designations, and why it matters to your estate plan.