The #1 Reason Estate Plans Don’t Work as Intended

Here’s one of the most common surprises in estate planning:

You can have a beautifully drafted trust… and still have your assets go somewhere else.

How? Beneficiary designations.

A “beneficiary designation” is the form you sign with a financial institution that says who receives an asset at your death. These designations often control even if your trust or will says something different.

Assets that usually pass by beneficiary designation

Common examples include:

• Life insurance

• Retirement accounts (401(k), IRA, 403(b))

• Payable-on-death (POD) bank accounts

• Transfer-on-death (TOD) brokerage accounts

• Some annuities

These are often called non-probate transfers—meaning they can pass outside of probate (and outside of your trust) based on the form on file.

Why this causes problems (even for careful people)

Beneficiary designations are easy to set… and easy to forget. People set them:

• When they start a job,

• When they open an account,

• When they get married,

• When a child is born…

…and then never revisit them for 10, 15, or 20 years.

Meanwhile, your trust gets updated, restated, or changed—but the old forms remain.

The MOST FREQUENT “real life” pitfalls

1. An ex-spouse is still listed
   This is painfully common and avoidable.

2. A minor child is named directly
   A minor generally can’t legally manage the funds. That can trigger court involvement at exactly the wrong time.

3. “Equal to my kids” unintentionally becomes unequal
   Example: your trust says “divide equally,” but your retirement account names only one child (or an older designation before your second child was born).

4. No contingent beneficiary is listed
   If your primary beneficiary dies first and no backup is named, the account can fall into your estate—creating delays and extra steps.

5. The wrong “trust name” is used
   People write “my trust” or an outdated trust name/date, or they forget to update forms after a trust restatement. Financial institutions can be picky, and ambiguity creates delay.

6. A beneficiary designation conflicts with your tax or protection goals
   Retirement accounts have their own tax rules. In some situations, naming a trust can be helpful; in others, naming individuals may be simpler. The key is coordination—not guesswork.

A simple coordination checklist

If you want your plan to work the way you think it works, do this at least every 2–3 years (and after any major life change):

1. Make a list of “beneficiary assets”
   Life insurance, retirement, POD/TOD accounts, annuities.

2. Get the designations in writing
   Don’t rely on memory. Ask each institution for a confirmation of who is currently listed.

3. Check for consistency with your trust plan
   Ask: If I died tomorrow, would these designations match what my trust says should happen?

4. Avoid naming minors directly
   If you want children to inherit, consider routing through a trust structure designed for that purpose.

5. Name contingent beneficiaries
   Always have a backup plan.

6. Coordinate with your advisors
   Your estate plan, your financial plan, and your insurance coverage should tell the same story.

The bottom line

If your trust is the “map,” beneficiary designations are the “roads.” And if the roads don’t match the map, your family ends up taking detours—sometimes expensive ones.

A short review of beneficiary designations is often one of the highest-impact, lowest-effort upgrades you can make to an estate plan.

If you’d like, Shafae Law can help you do a coordinated review—so your trust, your accounts, and your real-life goals all line up.