“Beneficiary designation” is a mouthful. It’s the kind of phrase that registers mainly as something you’ve heard before but not as a readily discernible “thing”. What it refers to is a choice you make for who will receive proceeds from an account when you die, and it’s something you’ll want to keep current.
Often, if folks are married, they’ll designate their spouse as the beneficiary of an account: a bank account, a retirement account, a life insurance policy, etc. Folks might even update their designation during marriage to make their spouse the beneficiary. The advantage of a beneficiary designation is that it tells the financial institution who should get the account, and a court doesn’t have to be involved. (This is why accounts that pass according to a beneficiary designation may be called “non-probate” assets.)
When folks divorce, they may think about updating their will. But, accounts with beneficiary designations might not get the same attention. For some folks, Washington law can keep a former spouse from receiving a benefit: Washington law automatically provides that, if a marriage ends, a beneficiary designation of a former spouse is revoked unless there’s express provision otherwise or unless a court order requires a beneficiary designation to stay in place.
However, for benefits that come through an employer–such as a retirement account–Washington law doesn’t matter. Federal employee benefit law controls the outcome and there isn’t an automatic revocation of a beneficiary designation upon divorce. For accounts of this type, that can have a huge financial impact. In the Estate of Lundy, the unchanged beneficiary designation made the difference between almost $500,000 going to the former spouse of the Decedent, rather than into his Decedent’s estate. Take home lesson: Mind–and update–your beneficiary designations.