All About Beneficiary Designations

ESTATE PLANNING ESSENTIALS

Beneficiary Designations: The Easiest Estate Planning Tool—and the Most Dangerous One to Ignore

By Justin J. Wall, Esq.

Trusts & Estates Attorney

Utah and Arizona

When most people think about estate planning, they think of wills and maybe trusts. What often gets overlooked are beneficiary designations—and that’s a mistake. These simple forms have the power to override your will, bypass probate, and transfer wealth instantly after death. They’re incredibly effective when used correctly—and incredibly risky when ignored.

Let’s take a closer look at what they are, where they show up, and how to use them wisely.

A beneficiary designation is a contractual instruction attached to an asset. It tells the company or institution that holds the asset who should receive it when you die. These are most commonly found on life insurance policies and retirement accounts like IRAs and 401(k)s. They also show up on annuities, pensions, and increasingly, on regular financial accounts like bank and brokerage accounts through “Payable on Death” (POD) or “Transfer on Death” (TOD) designations.

When you name a beneficiary, you create a legally binding transfer. Upon your death, that asset goes directly to the person you named—no court involvement, no probate, no delay. It’s one of the most efficient and cost-effective tools in the estate planning world.

But that efficiency comes with weight. These designations operate independently of your will or trust. If your will says your IRA should be split between your three children but the IRA beneficiary form still names your ex-spouse, the ex-spouse gets it. Courts will almost always enforce the designation on file with the institution, even if it contradicts everything else in your plan.

That’s why beneficiary designations need regular attention—especially after big life events like divorce, marriage, birth of a child, or death of a loved one. They also need to be coordinated with the rest of your plan. For example, if you’re using a trust to manage inheritance for a minor or financially vulnerable child, you may want to name the trust—not the child directly—as the beneficiary of an account or policy.

Another common mistake is failing to name contingent beneficiaries. If your primary beneficiary dies before you and no backup is listed, the asset may end up going through probate after all—undermining the very purpose of the designation. Likewise, naming minor children directly as beneficiaries can trigger court-supervised guardianships, because minors can’t legally own or manage significant assets.

For many people, beneficiary designations are the quiet backbone of their estate plan. They don’t require expensive documents or legal filings. They can be set up with a few clicks or a short form. But they do require clarity, consistency, and follow-through. Because once they’re on file, they control how assets move at death—whether your will agrees or not.

It’s also worth noting that financial institutions can only honor the version they have on record. If you filled out a beneficiary form 20 years ago and have since changed your mind, make sure you’ve submitted an updated form—and keep a copy for your records. Verbal promises, letters of intent, and even clear instructions in a will won’t undo a stale or outdated designation form.

Beneficiary designations work best when they are part of a coordinated estate plan. Used wisely, they allow for fast, direct transfers of wealth while avoiding probate. But they should never be treated as “set it and forget it” documents. Like every other part of your plan, they need periodic review—and professional guidance doesn’t hurt.

Take a few minutes to check your beneficiary designations this week. Look at your life insurance, retirement accounts, and any POD or TOD assets. Are the right people listed? Are your backups in place? If you’re not sure, or if something looks off, reach out to an estate planning attorney who can help align your beneficiary designations with the rest of your plan. A little time now can prevent a costly mistake later.