"For most people, this beneficiary designation is, in fact, their entire estate plan."

When people think about estate planning, many don't remember the importance of updating beneficiary information on financial products, such as 401(k)s and life insurance policies.

USA Today says that it's not just because many of us have the majority of our assets tied up in products like these. The article, "Your ex could get rich if you don't update your beneficiaries," explains that it's also because beneficiary designations on a 401(k) or IRA are legally binding and often take precedent over anything in your will. This can lead to some serious unpleasantries if your beneficiary information isn't updated.

Many times a person who has worked at the same company for 20 years has a beneficiary designation that they set up on their first day of work, and they never think about it again. However, their lives are rarely the same fifteen or twenty years down the line. For example, they might be divorced and remarried, or they might have children or grandchildren who weren't even a twinkle in someone's eyes way back then. Leaving an estate to an ex-spouse or disinheriting your own children is not a rare event when people don't update their beneficiary designations.

Even if family circumstances are friendly, when that money passes to someone else, they can't just give it back. The IRS allows gifts of under $14,000 tax-free annually, but anything over that is going to be subject to taxation.

Always remember that the beneficiary designation trumps a will. You can avoid a lot of trouble (and fees!) if you approach beneficiary designations the right way. One trick to avoid taxes as long as possible is to skip a generation with a tax-deferred retirement account like a 401(k) or IRA that you leave to your grandkids instead of your kids. Once you reach age 70½, you'll have to withdraw money from these accounts, but leaving the cash directly to a younger family member allows them to keep it growing tax-free for a few more decades.

Think about your accounts and how you'd want them to be passed on to your family, instead of leaving inheritance up to chance. Part of this is reviewing your beneficiary information regularly.

Many accounts allow you to designate beneficiaries with a simple online form, so you can ensure the orderly transfer of wealth in just a few minutes. Some others may take more time to update, but you'll be glad you did it—and so will your heirs!

Here are some common events triggering a need to update beneficiary designations:

• Marriage or divorce;
• Birth of a child or grandchild;
• Death of a previous beneficiary; and
• When a minor beneficiary comes of legal age to inherit.
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Here are some of the financial products through which you may designate a beneficiary:

• Retirement accounts (401(k) or IRA);
• 529 college saving plans;
• Life insurance;
• Annuities with a death benefit;
• Corporate profit-sharing plans;
• Pension plans;
• CDs, checking accounts or other bank accounts; and
• Some stocks, bonds, and mutual funds.
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Reference: USA Today (January 14, 2016) "Your ex could get rich if you don't update your beneficiaries"