April 1st, 2026 |

• Estate Planning

By Attorney Al Spiegel

Reading Time: 3 minutes

At a recent client conference, I asked some long-time clients of mine whether any changes to their revocable trust were necessary in light of life changes. Their response was horrifying.

“Our financial advisor told us we don’t need a trust, and we can just put beneficiaries on our accounts.”

Putting aside the illegal practice of law without a license to do so by the financial advisor, his or her advice is problematic to say the least. The following five potential land mines are completely ignored by just naming beneficiaries on financial accounts.

1. Missed Property

The first problem that arises when individuals try to prepare a “do-it-yourself” estate plan is that assets get missed. Did all of the bank accounts get beneficiaries? What about CDs at another bank? What about real estate? What about valuable personal property like cars, art or gold?
As much as the bank accounts with beneficiaries do avoid the probate court, any significant (over total value of $50,000) property that does not have beneficiaries will still have to go through the costly and public process.

2. No “Pot” of Assets

Even if every account does have beneficiaries, the second problem that comes up in non-trust situations is that individuals do not leave a pot of money to pay expenses and specific gifts. If all of the assets are transferred to one child via beneficiary, that child has no legal obligation to pay for funeral or other final expenses. In addition, that child has no legal obligation to pay any specific gifts laid out in the deceased person’s will. In other words, if a person’s will says that each grandchild gets $10,000, and all accounts are payable on death to Uncle Mark, Uncle Mark has no duty to pay the grandchildren out of his inheritance.

3. No Contingency Plan

An additional shortcoming of “do-it-yourself” estate plans is that they are usually completely devoid of any contingency planning in the event a named beneficiary predeceases the account owner. In other words, if Uncle Mark is the named beneficiary of all accounts and Uncle Mark dies, where does the money go? With some banks, it goes to Uncle Mark’s children. With others, it goes to the estate of the original owner (a/k/a probate). Most clients don’t know the answer to that question, and almost all do not like the answer when they hear it.

4. No Protection for Beneficiaries

Yet another concern about beneficiary-only plans is that many beneficiaries are not ideal candidates to get a check for a large sum of money shortly after the death of a loved one. Does the beneficiary have a disability? He or she may receive state benefits that will stop once a check is received. Is the beneficiary a minor? He or she will have to have the money supervised by the probate court until he or she is an adult. Is the beneficiary the subject of a lawsuit or involved in a divorce? The inheritance could cause all sorts of headaches that were not foreseen or prepared for.

As with the other issues raised, a well-drafted trust would not only avoid probate but also provide protection against the above-listed situations and more. That would allow the bequeathed funds to actually help the beneficiary, not give them a hard-to-solve headache.

5. Possible Future Problems

The final issue with beneficiary designations is born of the same ease and simplicity that makes them seem so appealing to the untrained eye.

The fact that it is so easy to go to a financial institution and set beneficiaries (no notaries, no fees, usually only a few moments of time) means that it is just as easy for a confused or pressured older person to change them in a way that is not consistent with his or her wishes. Attorneys have private meetings to discern true intentions and talk to clients to confirm they are doing what they intend to do. Filling out an online form or meeting with a bank advisor for a few minutes does not provide anywhere near the same level of protection.

For all these reasons, it is wise to consult with many advisors as part of the stewardship exercise of estate planning. Financial advisors and bankers have areas of expertise that provide many benefits to clients, as do estate planning attorneys.