Don’t Let Beneficiary Designations Derail Your Estate Plan
Posted by D’Marie Kleeman on October 02, 2025
When it comes to estate planning, many people focus on drafting a will or setting up a trust. But there’s a critical piece that often gets overlooked beneficiary designations. These designations determine who receives certain assets directly. If not carefully managed, they can unintentionally disrupt your estate plan and create confusion or conflict among your loved ones.
What Are Nonprobate Assets?
Nonprobate assets are those that transfer directly to beneficiaries without going through probate. Common examples include:
- IRAs and employer-sponsored retirement accounts
- Life insurance policies
- Payable-on-death (POD) bank accounts
- Transfer-on-death (TOD) brokerage accounts
Because these assets are governed by beneficiary designations, not your will or trust, it’s essential to ensure those designations reflect your current wishes and estate planning goals.
Three Steps to Align Your Beneficiary Designations with Your Estate Plan
1. Name Both Primary and Contingent Beneficiaries
Always designate both a primary and a contingent beneficiary. If your primary beneficiary passes away before you and no contingent is named, the asset may default to your estate. This can lead to unintended consequences:
- Assets being distributed contrary to your wishes
- Loss of creditor protection for certain accounts
- Increased probate costs and delays
Avoid naming your estate as a beneficiary unless advised by a professional. Instead, clearly identify individuals or trusts to ensure your wealth is protected and distributed as intended.
2. Update Beneficiaries as Life Changes
Beneficiary designations aren’t a “set it and forget it” task. Life events such as marriage, divorce, births, or deaths can dramatically affect your estate plan. Failing to update designations can result in assets going to someone you no longer wish to benefit from, like an ex-spouse.
For example, if your spouse is the primary beneficiary of a life insurance policy and your minor child is the contingent, and your spouse passes away, it may be wise to name a trust as the new primary beneficiary. This avoids complications like court-appointed guardianship for minors and ensures responsible asset management.
3. Consider Government Benefit Implications
If a loved one relies on government assistance such as Medicaid or disability benefits, naming them directly as a beneficiary could jeopardize their eligibility. In these cases, a special needs trust may be a better option. By naming the trust as the beneficiary, you can provide financial support without disrupting access to essential benefits.
Avoiding Unintended Consequences
Neglecting beneficiary designations can lead to costly legal disputes, delays in asset distribution, and emotional stress for your family. Vague or outdated designations may force assets into probate, defeating the purpose of having beneficiaries in the first place.
To protect your legacy and your loved ones:
- Review beneficiary designations regularly
- Update them after major life events
- Consult with an estate planning professional for complex situations
Final Thoughts
Your estate plan is only as strong as its weakest link and for many, that link is beneficiary designations. By taking a proactive approach, you can ensure your assets are distributed according to your wishes, minimize legal complications, and provide clarity and peace of mind for your family.
If you have questions or need help reviewing your estate plan, don’t hesitate to reach out. We’re here to help you navigate the complexities and make confident decisions about your future.
for more information
D’Marie is a tax principal with experience in all areas of U.S. Federal and New York State taxation. While specializing in performing tax services for individuals, trusts, and estates, she also provides tax services to commercial businesses, real estate-related businesses, privately held businesses, and private foundations.