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Estate Planning Series

Understanding Beneficiary Designations

Why They Can Override Your Will or Trust

Beneficiary designations play a major role in how your accounts transfer after you pass away, yet many people overlook how these designations actually work.

🧭 At a Glance

This article covers:

⚖️ Introduction to Beneficiary Designations
⚖️ What Beneficiary Designations Actually Do
⚖️ Types of Beneficiaries
⚖️ Accounts That Should Always Have Updated Beneficiaries Designations
⚖️ What Happens If You Don’t Add a Beneficiary
⚖️ When Your Trust Should Be the Beneficiary
⚖️ How Often Should You Review Beneficiary Designations?
⚖️ Quick Checklist You Can Use Today

Introduction to Beneficiary Designations

Beneficiary designations determine who receives certain accounts instantly when you pass away — outside probate and sometimes even outside your will or trust.

You should review your designations because:

  • They override the instructions in your will or trust
  • Many people accidentally leave ex-spouses or deceased relatives on old accounts
  • They ensure accounts pass smoothly to the person you intend
  • They keep assets out of probate
  • They are one of the simplest and fastest ways to protect your family

This article explains what beneficiary designations do, which accounts they affect, and how to set them correctly.

What Beneficiary Designations Actually Do

A beneficiary designation is a legal instruction you give directly to a financial institution stating who should receive your:

Key point: Beneficiary designations bypass your will and your trust unless you intentionally name the trust itself as the beneficiary.

  • Bank accounts with POD/TOD instructions
  • Retirement accounts
  • Life insurance
  • Investment accounts
  • Certain brokerage accounts
  • Annuities
  • Pension or employer benefits

When you pass away, the institution transfers the asset directly to the beneficiary—no probate, no court involvement.

Types of Beneficiaries

  • Primary Beneficiary
    The first person (or persons) who will receive the asset.
  • Contingent Beneficiary
    The backup — receives the asset only if the primary beneficiary cannot.
  • Per Stirpes Option
    Ensures your share passes to your beneficiary’s children if they pass away before you. This prevents accidental disinheritance.

Accounts That Should Always Have Updated Beneficiaries Designations

  • Retirement Accounts 401(k)
  • 403(b)
  • IRA / Roth IRA
  • SEP / SIMPLE IRA
  • Life Insurance Policies
  • Investment/Brokerage Accounts
    Many allow a Transfer on Death (TOD) designation.
  • Bank Accounts
    Many banks allow Payable on Death (POD) setup.
  • Employer Benefits Pensions
    Workplace life insurance
    Deferred compensation plans
  • HSAs (Health Savings Accounts)
    If no beneficiary is listed, the account may become fully taxable.

What Happens If You Don’t Add a Beneficiary

If you leave a beneficiary blank:

  • The asset may go through probate
  • The state decides who receives it
  • Taxes may be higher for heirs
  • The wrong person may inherit (based on default laws)
  • There may be delays of months or even years

Worst-case scenario:

Your ex-spouse or someone you removed from your will still gets the asset if they remain named on the account. This happens more often than most people realize.

⚠️ Many families believe updating a will updates beneficiaries—it does not.

When Your Trust Should Be the Beneficiary

There are times when naming your trust may the smarter route:

  • You want asset protection for beneficiaries
  • You want to manage distributions over time (not all at once)
  • You have blended family scenarios
  • You want centralized control under one document
  • You want a trustee to manage funds for minor children

But caution: Retirement accounts have special tax rules. Consult a professional before naming a trust as beneficiary.

How Often Should You Review Beneficiary Designations?

Review them:

  • Every 1–2 years
  • After major life events: Marriage or divorce
  • Birth or adoption
  • Death of a beneficiary
  • New accounts opened
  • Major financial changes

Also confirm your full legal name and your beneficiaries’ names are correct and spelled properly. Financial institutions still use whatever is on file — even outdated or misspelled names.

Quick Checklist You Can Use Today

Update or confirm beneficiaries on:

  • Savings and checking accounts (POD)
  • Investment accounts (TOD)
  • Employer retirement plans
  • IRAs / Roth IRAs
  • HSAs
  • Life insurance policies
  • Pensions
  • Employer-paid benefits
  • Annuities

Verify each account has:

  • A primary beneficiary
  • A contingent beneficiary
  • “Per stirpes” selected, if appropriate
  • Matching full legal names
  • Your trust listed when that is your intended instruction

This 20-minute exercise can prevent years of legal problems.

🛠️ Tools to Make Planning Easier (Phase 1 Free Resources)

Start with one or two of these simple tools which are designed to help you feel informed, empowered, and ready to take meaningful next steps.

Foundations & First Decisions

📘 Will & Trust Comparison Guide

A clear, side-by-side snapshot showing when a will is enough — and when a trust adds the protection your family needs.
Download: Coming soon

📘 Starter Estate Planning Checklist

A simple list of decisions and documents to help you begin building a basic plan.
Download: Coming soon

📘 “If You Do Nothing” Risk Snapshot

A one-page summary that shows exactly what happens when no documents are in place — court process, costs, delays, and state decisions.
Download: Coming soon

📘 Estate Planning Glossary

A growing reference of essential estate planning terms to support your learning across the entire series.
Download: Coming soon

Organization & Preparation

📁 Beneficiary Check-Up Toolkit

A guided worksheet to help you confirm — in writing — who is listed on each account and whether those designations match your wishes.
Download: Coming soon

📁 Family Information & Emergency Binder

A structured, fillable template to store essential info family members need during an emergency or after a death.
Download: Coming soon

📁 Conversation Prompts for Beginning Your Plan

Gentle, practical questions that help you start meaningful conversations with partners, parents, and adult children.
Download: Coming soon

Phase 1 Complete – Next Up

Move into Phase 2:
Trusts, Strategy & Asset Protection

Phase 2 explains how trusts work, why families often choose them, and how to properly fund, structure, and maintain them to avoid common and expensive mistakes. This phase moves readers from basic understanding into practical, action-oriented planning.

Get Started


🔍 Further Reading & Related Articles

Explore trusted, expert sources or related articles for deeper guidance on the topics covered in this phase.

📚 Further Reading

These trusted, expert sources offer clear explanations and deeper guidance on the topics covered in this article:

🌐 NOLO – Naming Your Main Beneficiary
🌐 Fidelity – What is a beneficiary?
🌐 Charles Schwab – What Is a Beneficiary? Why Naming Them Is Key

🎯 Related Articles

What You’ll Learn in This Phase

How foundational estate planning works, which tools protect your family, and how to avoid the costly consequences of doing nothing.

📘 Estate Planning 101
📘 Do I Need a Will, a Trust, or Both?
📘 What Happens If You Do Nothing?
📘 Understanding Beneficiary Designations
📘 Why You Still Need a Will (Even with a Trust)

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Disclaimer: Information is for educational purposes only and should not be considered legal or financial advice. Estate planning involves complex legal and tax considerations. You should consult a qualified estate planning attorney to determine the best approach for your situation and ensure compliance with your state’s laws.

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