Losing a loved one is difficult enough without the added stress of navigating financial and legal decisions. But if someone you named as a beneficiary—whether on a retirement account, life insurance policy, or payable-on-death account—has passed away, it can have a direct impact on your estate plan.

Many people assume their plan will work as intended no matter what. In reality, an outdated beneficiary designation can create unexpected consequences, including probate, delayed distributions, or assets going to the wrong individuals.

Taking time to review and update your accounts after a beneficiary passes away is a simple but critical step to protect your assets and ensure your wishes are carried out. Here's what you need to know to keep your estate plan on track.

Why Beneficiary Designations Matter More Than You Think

Who owns your accounts makes a big difference in estate planning. The main objective is usually to ensure that no accounts or property are in your name only when you die. Otherwise, they will be subject to probate, a costly, public, and time-consuming court process that many people prefer to avoid. Therefore, it is important that you review your accounts and beneficiary designations to be sure that the death of your loved one has not compromised your previously established plan.

What Happens If a Beneficiary Passes Away Before You?

Accounts with beneficiary designations, such as life insurance policies, retirement accounts, and annuities, will be distributed at your death, without probate court involvement, to the beneficiaries you have named. However, if you named only one beneficiary (the primary beneficiary) and that person predeceases you, the account will be distributed at your death according to the default rules in the policy or account agreement unless you update the primary beneficiary designation or have named a backup (contingent beneficiary). These default rules may give the balance of the account or policy to your spouse, your heirs (as defined by applicable state law), or your estate (which will require your loved ones to go through probate).

Accounts That Require Immediate Review After a Loss

Similarly, some accounts allow you to name a beneficiary via a pay-on-death designation (for cash accounts) or a transfer-on-death registration (for investment, brokerage, or stock accounts). These forms of beneficiary designation allow you to retain ownership but provide a way for the account to be transferred at your death to the named beneficiary outside the probate process. It is important that you know which accounts have these beneficiary designations: if your pay-on-death or transfer-on-death beneficiary predeceases you and you have no contingent beneficiary, you need to update the designations or risk the account being subject to probate.

Joint Ownership and Property: Hidden Risks After a Death

In some cases, to avoid probate, you may have added another person to an account or a property's title so that it is owned jointly with rights of survivorship. This form of ownership means that upon the first owner's death, the surviving owner automatically owns the entire account or property without going through probate. If you are relying on this method to avoid probate and your co-owner is deceased, we need to discuss other planning options, because you now own the entire account or property individually, which, without further planning, will have to go through probate at your death. The same rule applies to any property you may own with your spouse as tenants by the entirety. If your spouse is deceased, you are now the sole owner and will need to consider other planning options for the property if you intend to avoid probate.

How a Revocable Living Trust Fits Into the Picture

If your estate plan includes a revocable living trust (RLT), you should have transferred ownership of most of your accounts and property (with some exceptions, such as retirement accounts) from yourself as an individual to the RLT. Review your accounts and property, and confirm that your RLT is the owner of the accounts and property discussed above. 

Newly Inherited Assets: Don't Forget to Update Your Plan

If you inherited accounts and property from your deceased loved one or recently discovered or acquired new accounts or property, you must address these new items in your estate plan. Depending on the nature and size of these new items, you may need to modify your existing estate plan or add an additional planning tool, such as a special trust. If you can name a beneficiary for the account, please do so as soon as possible.

What Happens If You Don't Update Your Estate Plan?

If you began the estate planning process but did not finish it, or if you have discovered accounts or property that now need to be planned for, act now. Without an estate plan in place, the court will make all of your decisions for you. The court will decide

• who will receive your money and property at your death,

• how much each person will receive, and

• when each person will be entitled to receive the money and property (adults will likely receive their entire share right away).

Next Steps: Protecting Your Assets and Your Family

The death of a loved one is not only an emotional time—it is also a critical moment to revisit your estate plan. Outdated beneficiary designations, sole ownership of accounts, or unfunded trusts can unintentionally expose your assets to probate and undermine your long-term goals.

By proactively reviewing your accounts, updating beneficiaries, and ensuring your property is properly aligned with your estate plan, you can protect your legacy and provide clarity for those you care about most.

If you are unsure whether your current plan still works after a recent loss, now is the time to act.

Contact Hartmann Law Today

If you have questions about asset protection, contact our office to speak to an estate planning attorney.

Take steps to start your Life and Legacy planning today!  Take action to ensure your voice is heard when you are unable to speak for yourself.  Make the decision to protect yourself, your loved ones, your business, your property.   

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