Can I Just Set Up Beneficiaries on My Accounts in California?

You can do this but this is generally not recommended as proper estate planning. While designating beneficiaries can be an important tool in the estate planning process, there is much more to the overall analysis.

We have had estate planning clients who did not care about the risks of beneficiary designations on accounts and who were simply going to rely on the designations to pass assets on to their beneficiaries and, ultimately, it did work for them. Fortunately, our services were not needed for any formal administration—they rolled the dice and won.

It doesn't always work out that way. Unfortunately, we have had many more cases where the person thought it would be easier and cheaper to simply use beneficiary designations and it has led to prolonged and costly administration and has even led to litigation in some cases.

When Will a Beneficiary Designation Not Work as Intended?

Below are a few of the reasons a beneficiary designation would not work as intended:

  • The paperwork was not properly filled out or submitted.
  • A beneficiary died and no alternate was named.
  • An account with a beneficiary at one financial institution was changed to a different financial institution but a new beneficiary designation was not put in place at the new financial institution.
  • The balance of the account was insufficient to create an equal distribution at the time of death.
  • A beneficiary has become incapacitated without an estate plan in place and requires a conservator to be appointed to collect the designated assets.

In some cases, such as one account is depleted while other accounts that are going to a different beneficiary remain in tact or have much more value, it can also lead to litigation. In this case, if the intention was for an equal distribution, it could cause substantial friction amongst the beneficiaries as one could end up with substantially less than the others.

In each of these scenarios, there were issues that arose that could have and ordinarily would have already been accounted for within a trust or a will. While it is possible to use beneficiary designations alone, it does not always work out as planned.

Our experienced Orange County team at Giammichele Law, APC, is ready and able to assist you as best we can with examining whether beneficiary designations may be appropriate in your situation. Contact our office at 949-339-1845 to schedule an initial consultation.

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