Updating Your Beneficiaries and Creating a Basic Will: What New Parents Can’t Skip

Why Beneficiaries Override Your Will

Here is the most important thing most people don’t know about estate planning: a beneficiary designation trumps your will.

Your 401(k), IRA, life insurance policy, and many bank and brokerage accounts pass directly to whoever you named as beneficiary — regardless of what your will says. These are contractual designations that bypass the probate process entirely. If you named an ex-spouse as beneficiary on your 401(k) and forget to update it after divorce, your ex gets the money. Your will cannot change that.

This makes keeping beneficiary designations current one of the most important financial maintenance tasks you can do — and one of the easiest to overlook.

Which Accounts Need Beneficiary Designations

• 401(k) and 403(b) accounts — update through your employer’s benefits portal
• IRAs (Traditional and Roth) — update with the financial institution holding the account
• Life insurance policies — update with your insurer
• Bank accounts — most banks allow you to add a Payable on Death (POD) designation, transferring the account directly to the named person
• Brokerage accounts — Transfer on Death (TOD) designations work similarly
• Annuities and pension plans — contact the plan administrator

For each account, name both a primary beneficiary (first in line) and a contingent beneficiary (receives the account if the primary has already died). Skipping the contingent beneficiary means the account goes through probate if the primary predeceases you.

Naming Minor Children as Beneficiaries

You cannot leave a retirement account or life insurance policy directly to a minor child. If a minor is named as beneficiary, a court must appoint a guardian to manage the funds until the child reaches 18 — an expensive and time-consuming process.

The better approach: name your spouse as primary beneficiary, and name a trust or custodian under the Uniform Transfers to Minors Act (UTMA) as contingent beneficiary for your children’s shares. An estate attorney can set this up properly, or an online estate planning service can guide you through a simple version.

What a Basic Will Does (and Doesn’t Do)

A will controls the distribution of assets that don’t have beneficiary designations and aren’t held jointly — things like personal property, real estate held solely in your name, and financial accounts without TOD/POD designations. For most people with young families, the most important function of a will is this:

A will names a guardian for your minor children. Without one, a court decides who raises your children. That court doesn’t know your family, your values, or your wishes. Writing it down in a legal document is the most concrete protection you can provide for your children.

A basic will also names an executor (the person responsible for carrying out your wishes) and can specify funeral preferences. For simple situations — married with children, modest estate, no business interests or complex assets — this is sufficient.

DIY vs. Hiring an Attorney

For straightforward situations, online estate planning services like Trust & Will or LegalZoom can produce valid wills for $100–$200. These tools work well when you have a simple family structure, no business ownership, and a straightforward asset picture.

Consider hiring an estate attorney when you have:

• A blended family or children from multiple relationships
• Business ownership or significant assets
• A disabled beneficiary who needs special needs trust provisions
• Real estate in multiple states
• Concerns about heirs’ ability to manage an inheritance responsibly

A straightforward estate plan from a local attorney typically costs $500–$1,500 in Alabama and includes a will, power of attorney, and healthcare directive — three documents that together cover the major scenarios.

What to Do This Week

You don’t need to have everything figured out perfectly. Start here:

1. Log in to your 401(k) and IRA accounts and confirm your beneficiary designations are current and accurate.
2. Check your life insurance policy beneficiary.
3. Ask your bank about adding a POD designation to your checking and savings accounts.
4. Schedule one hour to create a basic will using an online service or attorney consultation.

Revisit these designations after every major life event: marriage, divorce, birth or adoption of a child, death of a named beneficiary.