After your death your retirement accounts, life insurance policies, annuities and accounts at financial institutions will be governed by beneficiary designations already in place. If those designations are outdated, unspecific or wrong, your assets may not be distributed the way you would like.

All the funds from your retirement accounts, life insurance policies, annuities and accounts at financial institutions are governed by the beneficiary designations in place at the time of your death. If those designations are outdated, unspecific or wrong, your assets may not be distributed the way you would like. Make sure these assets reach the individuals and organizations you choose by following these guidelines for assigning beneficiaries:

Be specific and stay current. If you name a beneficiary, your assets can pass directly to that person or entity without going through a legal process called probate. Remember to update these designations, if necessary, following life events such as divorce, remarriage, births, deaths, job changes and retirement account conversions.

Think about unexpected outcomes. Be alert to the effect of taxes and try to avoid unintended consequences. For example, if the money in your accounts is distributed directly to your heirs, they may be stuck with a large unexpected tax bill. For wealthier heirs, estate tax may also play a role. In 2016, the estate tax exclusion is $5.45 million and the top estate tax rate is 40%. Another concern: If one of your designated beneficiaries is disabled, his or her government benefits may be reduced or eliminated by the transfer of assets. You may want to consult an attorney to establish a special needs trust to ensure your loved one is not adversely affected by your generosity.

Name contingent beneficiaries. If your primary beneficiary dies or is incapacitated, having a backup (contingent) selection named will ensure that your assets are properly distributed. In some cases, a primary beneficiary may choose to disclaim, or waive, the right to the assets. In that case, contingent beneficiaries can step up to primary position.

Practice good record keeping. Keep your beneficiary designation forms in a safe location, and maintain current copies with your financial institution, attorney, or advisor.

Beneficiary designations are an important part of estate planning. If you keep them up to date, well planned and carefully organized, you can be confident that your assets will reach your intended beneficiaries and be a valuable legacy for your loved ones.