How to Simplify an Estate Plan with a Beneficiary Review

Estate planning often sounds like something only wealthy families need to worry about. The federal estate tax exemption increased in 2026 under the One Big Beautiful Bill Act (OBBBA)—now shielding estates under $15 million for individuals and $30 million for married couples. Less than 1% of US households¹ will face a federal estate tax, but that doesn’t mean planning is unnecessary for everyone else. Anyone who owns property, savings or personal belongings should consider and plan for someone to inherit them.

A helpful starting point is a simple question: If you weren’t here tomorrow, is there anything you’d want someone else to receive or enjoy? If the answer is yes, then simple estate planning can help ensure your wishes are honored. One of the easiest and most overlooked steps in basic planning is properly naming beneficiaries on retirement accounts, life insurance policies, and annuity contracts.

Good beneficiary planning can help heirs avoid delays, reduce administrative and tax costs, and prevent disputes or accidental inheritances. It also allows much of what you own to transfer quickly and privately.

Here are some important guidelines for individuals looking to establish an estate plan. Before they choose beneficiaries, they may want to review the following definitions and make an initial list before setting up a plan with a financial or legal professional.

Understanding probate vs. non‑probate assets

Before choosing beneficiaries, it’s important to know the difference between probate and non‑probate assets.

Probate assets

A will governs probate property. This typically includes:

Real estate titled only in one name
Vehicles
Personal belongings such as jewelry, collectibles and heirlooms
Financial assets individually owned that do not have a valid beneficiary designation
Property titled as Joint Tenants in Common
Probate is the court-supervised process that validates the will and oversees distribution of the assets. When there is no will—or the will is deemed invalid—state law takes over. This can lead to unintended outcomes. For example, in some states parents or siblings may inherit a portion of the estate, even if you prefer everything be left to your children.

A will is essential, but it does not cover everything you own.

Non‑probate assets

Beneficiaries can be named directly for these accounts and policies. Upon death, these assets transfer automatically—without going through probate.

Common non‑probate assets include:

Retirement accounts (401(k), 403(b), IRA, pension, etc.)
Life insurance
Health Savings Accounts
Annuities
Certain bank or brokerage accounts (Payable on Death (POD)/Transfer on Death (TOD) forms)
Employer stock or equity compensation

Naming beneficiaries for these accounts is one of the simplest ways to make sure a large portion of an estate reaches the right people quickly.

One major rule: Avoid naming your will as a beneficiary. Financial institutions generally cannot interpret wills and may treat the designation as invalid, forcing the asset through probate. A few words like “As stated in my will” have caused significant issues for families settling estates.

Choosing beneficiaries

Beneficiaries fall into two categories: individuals and entities.

Individuals: Includes spouse, children or other family members, friends or others.

It’s important to note when a minor is named as a beneficiary, the assets will be managed by a guardian until the child reaches the legal age determined by state law. Spouses have special treatment for inherited retirement accounts, allowing them to treat the account as their own—an option not available to non‑spouses.

Entities: Includes charities, trusts or an estate.

A trust may give the owner more control, such as directing how and when heirs receive money. However, trusts may also create different tax outcomes, particularly for retirement accounts. As a result, it’s important for individuals to consult with qualified professionals.

Pets and objects cannot be designated beneficiaries, but you can leave money for a caretaker or create a pet or other property trust which can provide instructions for the care of your property.

Primary and contingent beneficiaries

Most accounts allow for primary beneficiaries, which are the first in line to inherit, and contingent beneficiaries, who inherit only if one or all primaries have passed away.

This two‑level structure ensures assets are assigned even if life changes unexpectedly.

Understanding per capita and per stirpes

Many beneficiary forms allow for the determination of how a beneficiary’s share is redistributed if they pre-decease you. Two common contingencies are explained here:

Per capita (“by head”)
If one primary beneficiary has passed away, their share is divided among the remaining primary beneficiaries. Contingent beneficiaries only inherit if no primaries survive.
Per stirpes (“by branch” or “by root”)
A deceased beneficiary’s children inherit their parent’s portion. This keeps assets within each family line and is often preferred by those wanting their estate to pass generationally.

To illustrate these scenarios, consider this example of three primary beneficiaries with the following inheritance share—Primary 1 (34%), Primary 2 (33%), Primary 3 (33%). Primary 1 has two children and has pre-deceased the owner, and Primary 2 and 3 each have one child.

For something more nuanced, many institutions will accept custom instructions, but these must be written clearly and approved ahead of time. Certain types of accounts such as bank and brokerage accounts using POD/TOD designations typically have more limited beneficiary options.

Beneficiaries differ from account titling

It’s important not to confuse ownership with inheritance. Adding someone as a joint owner gives them immediate rights to an account or property and may create gift tax issues or eliminate tax advantages like a step‑up in cost basis at death on the joint tenant’s share of the asset. Beneficiary designations avoid these complications.

Reviewing and updating estate plans

When life events cause changes, beneficiaries may change, too. This underscores the importance of doing a beneficiary review with a financial or legal professional. Some common life events include:

After marriage or divorce
After a birth or death
When financial situations change significantly
Creating a trust
Relocating to a new state (Wills may need updates per different state laws)

Reviewing beneficiaries every few years can help keep plans on track.

Key steps to prepare for a beneficiary review

Make a list of assets and who you want to inherit them
Update beneficiaries on non‑probate accounts
Create or revise a will for probate assets
Keep estate documents organized
Consult tax, legal, or financial experts as needed

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Endnote

¹ Institute on Taxation and Economic Policy, “The Estate Tax is Irrelevant to More Than 99% of Americans,” December 7, 2023.

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