Beneficiary Designations: Do's and Don'ts
June 4, 2025
How you handle the beneficiary designations on your life insurance and retirement accounts can be just as important as naming the beneficiaries of your probate estate in your last will and testament. I call them non-probate assets. In the hundreds of estate planning worksheets I have received from clients in the past few years I have identified a common pattern. About half the family wealth passing to the next generation in the event of a death with no surviving spouse are the non-probate assets.
For discussion purposes let’s address the hypothetical couple with one or more children under 25 years of age. Often that couple will have no less than $500,000 of life insurance coverage through a combination of the group term policies from their employers and the individual policies they own. If they have been prudent, or fortunate enough to have a generous 401(k) plan at work, there might be another $200,000 in retirement accounts. With equity in their home, some stock investments and cash, this couple could be “worth” about a million dollars in the event of both of them dying, either simultaneously or sequentially. Let’s also assume that they have been prudent enough to get wills drawn up when the children were younger.
Unfortunately, they have been too busy with everyday life to revisit the subject of their wills and estate plan. The wills are now more than ten years old. In the intervening years those non-probate assets built up without much thought as to how they relate to the provisions in their wills. Ideally they have a contingent trust in those wills that will be established in the event that there is no surviving spouse and there are children living. But how will all those non-probate assets get into that contingent trust?
The answer is the secondary beneficiary designation. Usually that designation will specify the trust established by the insured’s last will and testament. That is called a testamentary trust. Sometimes it will be a trust established by a separate document (often called a “living trust”).The person named as trustee obtains the payment of the life insurance and retirement account, but only if the trust is designated as the secondary beneficiary.
In Georgia a testamentary trust is fairly common because Georgia’s probate system is very user friendly. However, sometimes it can be appropriate to write a revocable trust (a “living trust”) instead of a testamentary trust. Then the secondary beneficiary for John A. Client could be the Trustee of the John A. Client Family Trust, under agreement dated 12/1/2020.
Someone who does not have a trust for young children might be tempted to put them down as the secondary beneficiaries of the life insurance. That is not a good idea. If the death benefit from life insurance is payable to someone who is under 18 years of age, the company will insist on paying it to a court-appointed conservator of the property. The legal costs and the premiums for the surety bond required for any court appointed conservator can be considerable. Once the child attains 18 years of age, the entire death benefit must be turned over to the child. In the meantime, without permission from the probate court, the conservator can only invest the trust’s assets in bank accounts, certificates of deposit and state/federal government bonds.
It’s far better if the death benefit is held in a trust. The terms of the trust can require the trustee to use the money for the child’s care, education and support. Investments by a trustee are governed by the reasonable prudent investor rules. The trust assets can be invested in stocks, bonds and financial instruments. Individuals serving as trustee can engage an investment advisor to design and manage an investment portfolio.
The trust provisions can delay the ultimate distribution of all the assets to the child until a time when the parent believes the child is going to be responsible. In the worst case scenario the trust will continue to operate during the entire lifetime of the child.
Finally, there can be complicated income tax issues when the trust is named as the secondary beneficiary of a retirement account (with the spouse as primary). Special trust provisions should instruct the trustee to comply with the tax code’s requirements for distributions from the trust to the beneficiary after the death of an account holder. It’s a complicated subject deserving a separate blog post. Suffice it to say that boilerplate trust provisions are unlikely to even mention the tax angles.
The job is not done until the legal documents have suitable beneficiary designations so that both probate and non-probate assets will end up controlled by the plan embodied in those documents.
A colleague of mine who had more than 50 years experience in the field of wills, trusts and estates once recounted to me his exchange with a prospective client who asked how good his will would be if he wrote it himself using online software. My colleague’s answer was that it would be a good will for an attorney because the attorney would make a lot of money cleaning up the mess after the client’s death. That may sound cynical, but there is a lot of truth in it. I have been asked to assist executors in probating about four or five wills that were written by (deceased) testators. I am still waiting to see one that did not create problems and/or a lot more work to probate in comparison to a professionally prepared will. The best you can say for a do-it-yourself will is that it provides a starting point for an attorney because it probably answers some major questions in advance of a client conference. But that unsigned will should be treated only as a tool for the preparation of a well-drafted will. Here are some of the reasons I don’t like “do-it-yourself wills”: 1. The online form was probably written for a national “audience.” Thus, all of the standard provisions that attorneys in Georgia (in my case) usually include are not going to be present. 2. It most likely does not include a specific grant of statutory powers to the executor. There is a prescribed method to allow the executor to independently administer the estate without requirements to obtain permission(s) or approval(s) from the probate court, but you must specifically refer to the section of the Probate Code providing that authority. 3. Contingent beneficiaries will not be adequately addressed. A lot of “simple wills” give everything to the spouse and, if there is no surviving spouse, then to children. But what if one child does not out-live both the testator and the spouse and some grandchildren/beneficiaries are minors? A well-drafted will most likely establishes a trust for those grandchildren, assuming disinheriting them is not an objective. 4. A lot of those off-the-shelf wills are not going to separately address tangible personal property. Who is it going to receive the “stuff” and how is it going to be divided if there is no surviving spouse? 5. The “blended family” situation with children from a previous marriage is a complicating factor and may easily be overlooked when referring to “my children.” Are the children of both spouses to be included in that phrase? 6. Non-probate assets such as life insurance and retirement accounts are controlled by beneficiary designations but if one is totally focused on the will, setting up primary and secondary beneficiaries for those assets (with appropriate provisions if there are minor children) can be overlooked. Sometimes they make up about half of the family wealth. 7. A will may not be the right estate planning tool for a person who does not have any close relatives. Imagine someone whose closest living relatives are cousins. The executor is required to notify those relatives in order to probate the will. That would be very difficult if their names and addresses are not known. In that situation using a well-drafted trust and appropriate beneficiary designations will be essential to an effective estate plan and the will should assume a secondary role. 8. The method of execution for the will-signing may be legally insufficient or create additional work to successfully probate the will. A will ends on the signature page with the signatures of the testator and the witnesses with the requisite language to show testamentary intent and a proper execution. However, any professionally drafted will is going to have a subsequent page with an affidavit signed by those three people before a notary that constitutes “proof” of the facts required when the will is offered for probate. No affidavit? Then, the executor must locate the witnesses and obtain a notarized document reciting all of those facts. That could be difficult if 20 years have passed since the will’s signing. 9. Other essential legal documents can be overlooked if one is fixated on doing a will and nothing else. A good estate plan should include an Advance Directive for Healthcare and a General Power of Attorney. Those documents designate an agent to manage medical and financial affairs if one is unable to do so because of legally incapacity or other reasons. Those documents should be based upon statutory forms and are therefore “state specific.” Is a website going to have separate forms for all fifty states? As the sergeant told the police officers on the TV show Hill Street Blues before they went out on patrol, “Be careful out there.”
Common Concerns About Estate Taxes Estate taxes are often a major concern for individuals beginning the estate planning process. Many people worry that a significant portion of their estate will be lost to taxes, leaving less for loved ones. These concerns are understandable, but they are often based on misunderstanding how estate taxes apply. How Estate Taxes Apply Under Georgia Law Georgia does not impose a separate state estate tax. However, federal estate tax rules may still apply in certain situations depending on the size of the estate. Because federal thresholds and rules can change, understanding the general framework helps individuals assess whether estate taxes are likely to be a concern. Inheritance and Beneficiary Considerations In addition to tax concerns, many individuals want to understand how inheritances are handled. Beneficiary designations, asset ownership, and planning documents all play a role in how property is transferred. Clear planning helps reduce uncertainty and ensures assets are distributed according to personal wishes. Why Estate Tax Planning Is Often Overestimated For many Georgia residents, estate taxes are not a significant issue due to federal exemption limits. However, planning still serves important purposes beyond taxes, such as clarity, efficiency, and protection for loved ones. Understanding the full scope of estate planning helps place tax concerns in proper context. Final Thoughts Understanding estate taxes and inheritance concerns allows individuals to approach estate planning with realistic expectations. Addressing these topics under Georgia law helps reduce uncertainty and supports thoughtful planning decisions. This content is for general informational purposes and does not constitute legal advice.
Why Estate Planning Myths Persist Estate planning myths are common and often lead people to delay or avoid planning altogether. These misconceptions are usually based on outdated information, assumptions, or stories shared without understanding how Georgia law actually works. Relying on myths instead of accurate information can result in unintended outcomes for families and loved ones. “I’m Too Young to Need an Estate Plan” One common belief is that estate planning is only necessary later in life. In reality, adults of any age can benefit from having basic planning documents in place, especially those who own property, have children, or want to control decision-making during incapacity. Unexpected events can happen at any time, making early planning a practical step. “I Don’t Have Enough Assets to Plan” Another misconception is that estate planning only applies to people with significant wealth. Estate planning is about more than asset value. It also addresses guardianship, decision-making authority, and clarity for loved ones. Even modest estates can benefit from thoughtful planning under Georgia law. “A Will Avoids Probate” Many people believe that having a will means probate will not be necessary. In Georgia, a will generally must be admitted to probate in order to be carried out. While certain planning tools may reduce probate involvement, a will alone does not avoid it. Understanding this distinction helps set realistic expectations. Final Thoughts Estate planning myths can create confusion and unnecessary delay. Understanding how Georgia law actually applies allows individuals to make informed decisions and plan with greater confidence. This content is for general informational purposes and does not constitute legal advice.
Why Preparation Matters Preparing for an estate planning meeting helps make the conversation more productive and focused. While not every document must be finalized in advance, having key information available allows the discussion to move more efficiently. Preparation also helps individuals feel more confident and informed during the planning process. Personal and Family Information to Consider Estate planning often involves discussing family relationships and responsibilities. Information about spouses, children, and other intended beneficiaries provides important context for planning decisions. Understanding family dynamics can help ensure documents are structured appropriately. Financial Information That May Be Helpful While exact numbers are not always required, having a general understanding of assets and property ownership can be useful. This includes real estate, financial accounts, and business interests located in Georgia or elsewhere. Clear information helps ensure planning tools are matched to the nature of the assets involved. Questions and Goals to Think About in Advance Many people find it helpful to consider their goals before meeting with an attorney. This may include how assets should be distributed, who should serve in fiduciary roles, and what concerns they want addressed. Thinking through these topics ahead of time helps guide the discussion. Final Thoughts Preparing for an estate planning meeting does not require perfection, but thoughtful preparation can make the process smoother. Gathering information and clarifying goals helps ensure the meeting is productive and aligned with individual needs. This content is for general informational purposes and does not constitute legal advice.
Why Estate Plans Should Not Stay Static An estate plan is not a one-time task. As life changes, estate planning documents should evolve to reflect new circumstances, relationships, and goals. Plans that are not updated may no longer function as intended under Georgia law. Even well-drafted documents can become outdated if they do not account for significant life events. Common Life Events That Trigger a Review Major life changes often affect how assets should be distributed or who should serve in decision-making roles. Marriage, divorce, the birth of a child, or the death of a loved one can all impact an existing estate plan. Changes in financial circumstances, such as acquiring property, starting a business, or retiring, may also require updates to planning documents. Risks of Failing to Update an Estate Plan Outdated estate plans can create confusion, unintended distributions, or increased court involvement. Beneficiary designations that no longer align with personal wishes may override planning intentions. In some cases, old documents may even create conflict among family members if expectations are unclear. How Often Plans Should Be Reviewed While there is no fixed schedule, many Georgia residents benefit from reviewing their estate plan every few years or after major life events. Regular reviews help ensure documents remain aligned with current goals and applicable law. Proactive updates are generally easier than addressing problems after they arise. Final Thoughts Updating an estate plan after major life changes helps ensure that personal wishes are accurately reflected and legally effective. Regular reviews support clarity, reduce uncertainty, and help families avoid unnecessary complications. This content is for general informational purposes and does not constitute legal advice.
What Incapacity Planning Means Planning for incapacity addresses what happens if a person becomes unable to make financial or medical decisions due to illness, injury, or other circumstances. While estate planning often focuses on what happens after death, incapacity planning focuses on protecting individuals during their lifetime. In Georgia, incapacity can occur unexpectedly, making advance planning especially important. Why Incapacity Planning Matters Without clear legal authority in place, family members may need court involvement to act on behalf of an incapacitated loved one. This process can be stressful and time-consuming, particularly during medical emergencies. Incapacity planning allows individuals to designate trusted decision-makers in advance, reducing uncertainty and providing guidance during difficult situations. Common Documents Used in Incapacity Planning Legal documents such as financial powers of attorney and advance healthcare directives help outline who can make decisions and what authority they have. These documents allow personal preferences to be respected when individuals cannot speak for themselves. Having these documents in place helps provide continuity and clarity during periods of incapacity. Addressing Misconceptions About Timing Many people believe incapacity planning is only necessary later in life. In reality, adults of all ages can face unexpected medical situations that affect decision-making ability. Planning early helps ensure protections are in place regardless of age or health status. Final Thoughts Planning for incapacity is a key component of a comprehensive estate plan. Addressing these issues under Georgia law helps protect personal wishes and reduces the burden on loved ones during challenging times. This content is for general informational purposes and does not constitute legal advice.
Misunderstanding How Probate Works One of the most common probate mistakes families make is assuming the process will be simple or automatic. In Georgia, probate is a legal proceeding with specific court requirements, timelines, and responsibilities. When families are unfamiliar with these steps, delays and frustration often follow. Probate can move quickly in some cases, but it may also take months or longer depending on the estate. Understanding that probate is a structured legal process helps set realistic expectations from the beginning. Relying on Incomplete or Outdated Documents Another frequent issue arises when estate planning documents are outdated or unclear. Wills that no longer reflect current family relationships, asset ownership, or beneficiary intentions can create confusion during probate. Even minor inconsistencies can require court clarification, which adds time and expense. Keeping documents current helps reduce complications when they are needed most. Underestimating the Role of the Personal Representative Serving as a personal representative involves more than carrying out wishes informally. Under Georgia law, executors and administrators have legal duties that include managing assets, meeting deadlines, and maintaining accurate records. When personal representatives are unprepared for these responsibilities, mistakes can occur that slow the process or create additional legal issues. Understanding the scope of the role is essential. Family Disputes and Communication Breakdowns Probate can surface underlying family tensions, especially when expectations are unclear. Disagreements over asset distribution or decision-making authority can lead to objections that prolong probate proceedings. Clear planning and communication during life can help reduce the likelihood of disputes after death. Final Thoughts Many probate mistakes stem from misunderstanding rather than neglect. By recognizing common problem areas, families can approach the probate process with greater awareness and preparation under Georgia law. This content is for general informational purposes and does not constitute legal advice.
What Probate Means Under Georgia Law Probate is the court-supervised process of administering an estate after death. The probate court oversees: Appointment of a personal representative Payment of debts and expenses Distribution of assets according to a will or Georgia law The process varies depending on estate size and complexity. Key Steps in the Probate Process While each case is unique, probate often includes: Filing documents with the probate court Notifying heirs and creditors Inventorying estate assets Resolving outstanding obligations Distributing remaining property Some estates move quickly, while others take longer. Factors That Affect Probate Timelines Probate timelines may be influenced by: Whether a valid will exists Estate size and asset types Creditor claims Disputes among beneficiaries Delays are not uncommon, especially when documentation is incomplete. Responsibilities of the Personal Representative The personal representative (executor or administrator) has fiduciary duties, including: Acting in the best interest of the estate Keeping accurate records Following court requirements These responsibilities carry legal obligations under Georgia law. How Probate Affects Families Probate can be an emotional process for families. Clear planning and understanding the process can help reduce stress and uncertainty during an already difficult time. Final Thoughts Understanding the Georgia probate process helps families prepare for what lies ahead. Knowing the basic steps and expectations can make navigating probate more manageable. This content is for general informational purposes and does not constitute legal advice.
What Is Probate? Probate is the legal process used to settle a person’s estate after death. In Georgia, probate generally involves: Validating a will Appointing a personal representative Paying debts and expenses Distributing remaining assets to beneficiaries Not every estate requires probate, but many do. When Probate Is Typically Required in Georgia Probate is often required when: Assets are titled solely in the deceased person’s name There is no beneficiary designation Real estate is owned individually A will must be formally administered In these situations, court involvement may be necessary to transfer ownership legally. Assets That May Pass Outside Probate Certain assets may pass outside the probate process, including: Assets held in a valid trust Jointly owned property with rights of survivorship Life insurance proceeds with named beneficiaries Retirement accounts with beneficiary designations Proper planning helps ensure these assets transfer efficiently. Common Misunderstandings About Avoiding Probate Many people believe probate can always be avoided. In reality: Some probate involvement may still be required Poorly drafted plans can increase complications Failing to update beneficiaries can create problems Understanding how assets are titled is critical. Why Knowing This Matters Knowing when probate applies helps families: Set realistic expectations Reduce delays and confusion Make informed estate planning decisions Clarity helps loved ones navigate the process more smoothly. Final Thoughts Whether probate is required depends on how assets are owned and how planning documents are structured. Understanding these distinctions under Georgia law is an important step in effective estate planning. This content is for general informational purposes and does not constitute legal advice.
Why Estate Planning Matters for Families With Children For families with children, estate planning goes beyond asset distribution. It also addresses guardianship, financial support, and long-term planning. Without a plan, Georgia law determines who may make decisions for minor children, which may not align with a parent’s wishes. Naming a Guardian for Minor Children One of the most important estate planning decisions for parents is naming a guardian. A guardian may be responsible for: Providing daily care Making educational decisions Overseeing health and well-being Including guardianship provisions in a will helps provide clarity and guidance. Managing Assets for Children Children generally cannot manage inherited assets on their own. Estate planning tools such as trusts may be used to: Hold assets until a child reaches a certain age Provide structured distributions over time Designate a trustee to manage funds responsibly These tools help ensure assets are used as intended. Planning for Unexpected Situations Estate plans can also address: Temporary guardianship Financial management during incapacity Healthcare decision-making Planning ahead helps families prepare for unexpected events. When to Review a Family Estate Plan Family estate plans should be reviewed when: Children are born or adopted Family circumstances change Financial situations evolve Regular updates help keep plans aligned with family needs. Final Thoughts Estate planning provides families with children an opportunity to plan thoughtfully for the future. Under Georgia law, having a clear plan helps protect children and provides peace of mind for parents. This content is for general informational purposes and does not constitute legal advice.