Why Reviewing Your Beneficiaries Should Be Part of Your Regular Financial Checkup
When it comes to estate planning, one of the most overlooked—but most important—steps is reviewing your beneficiary designations. These designations can override the instructions in your will or trust, which is why they deserve your attention regularly.
Beneficiaries Override Your Will
Named beneficiaries on accounts or policies—such as retirement accounts, life insurance, or transfer-on-death (TOD) accounts—take legal priority over the instructions in a will or trust. These designations create a direct contractual relationship between you and the financial institution, meaning the asset bypasses the probate process and goes directly to the named beneficiary.
Even if your estate plan says otherwise, the named beneficiary will typically inherit the asset. That’s why it’s critical to keep these forms up to date—outdated or forgotten designations can unintentionally bypass your broader wishes.
For example: If your ex-spouse is still listed as the beneficiary on your 401(k), they could legally inherit the account—even if your will leaves everything to your current spouse.
Per Stirpes or Per Capita? It Makes a Big Difference
When naming beneficiaries, it’s important to understand the difference between per stirpes and per capita designations. Per stirpes means that if a beneficiary predeceases you, their share passes to their descendants (e.g., your grandchildren). Per capita, on the other hand, distributes assets equally among the surviving beneficiaries in the named group, with no inheritance rights for the deceased beneficiary’s heirs. This distinction can significantly impact how your assets are divided and whether younger generations are included if something happens to an intended heir.
For example, suppose you name your three adult children as equal beneficiaries with a per capita designation, and one of them sadly predeceases you. In that case, the two surviving children will each receive half of the estate, and the children of the deceased heir (your grandchildren) would receive nothing.
Clarifying this choice ensures your wishes are carried out as intended.
What Is Probate?
Probate is the court-supervised legal process through which a deceased person’s assets are collected, debts are paid, and the remaining estate is distributed. It generally includes:
Filing the will (if one exists) with the probate court
Appointing a personal representative (also called an executor or administrator)
Inventorying the deceased person’s assets
Paying debts and taxes owed by the estate
Distributing remaining assets to heirs or beneficiaries
Assets typically subject to probate include:
Real estate owned solely by the decedent
Bank or investment accounts without a named beneficiary or TOD/POD designation
Life insurance policies where the deceased’s estate is listed as the beneficiary
Personal property such as vehicles, jewelry, or collectibles
Business interests held individually, without a trust or succession plan
What Assets Avoid Probate?
Some assets are structured to pass outside of probate by default, including:
Accounts with designated beneficiaries (e.g., IRAs, 401(k)s, life insurance)
Assets held in a revocable living trust
Jointly owned property with rights of survivorship or held as tenants by the entirety
Accounts with transfer-on-death (TOD) or payable-on-death (POD) designations
Why People Try to Avoid Probate
There are good reasons why many people aim to avoid probate:
It can be slow, often taking several months to over a year
It can be costly, due to court fees, attorney fees, and appraisal costs
It becomes part of the public record, reducing privacy
It may delay access to funds that heirs need
What About Estate Taxes?
Avoiding probate doesn’t mean avoiding estate taxes. Even if assets pass outside of probate, they’re generally still included in your gross estate for estate tax purposes.
If your estate value approaches or exceeds the federal estate tax exemption (about $13 million per person in 2025), or if you live in a state with its own estate or inheritance tax (which often has a much lower exemption), proactive planning becomes essential.
Under the current rules, most households won’t owe federal estate taxes. However, if you’re fortunate enough to be nearing that level of wealth—or even half that amount, given that current exemption levels are set to sunset after 2025—then working with a financial advisor and estate attorney sooner rather than later can be a smart move.
Take Action
Review your beneficiary designations at least once a year, or any time you experience a significant life event—such as marriage, divorce, the birth of a child, or the death of a loved one.
I like to review our own beneficiary designations in the summer, when the pace of life slows down and there’s more space to think clearly. My family just got back from a week at the Rappahannock River, and let me tell you—it’s hard to be overcome with existential dread when you’re sipping a cocktail by the pool overlooking the water. Taking care of these little planning tasks in a season of calm makes them feel a lot less heavy and a lot more doable.
It only takes a few minutes, but it could save your loved ones from confusion, delays, and unintended outcomes later on. Make it part of your annual financial checkup.
Current clients of Oakleigh receive a beneficiary report annually as a reminder to review and update their designations to align with their current plan.
Clients who have their accounts at Altruist (our custodian) can find instructions for updating beneficiaries on our “Client Links” page or by following this direct link.
