Certain types of assets allow you to designate a beneficiary who will get the asset when you die. These assets include certain bank accounts, brokerage accounts, retirement accounts, land trusts, and life insurance.

Again, this seems like a good alternative to having a comprehensive estate plan. However, like the other options mentioned, this approach can create problems.

The most obvious problem can occur when the person who’s supposed to receive the gift dies before you. If you don’t have enough contingent beneficiaries named, the property will be treated as if you had done nothing, and will be distributed according to the State of Illinois’ plan for you.

If the beneficiary you name is under a disability or is a minor, probate court involvement will be required to administer the gift.

Having some gifts pass by beneficiary designations and having the remainder of your gifts pass by Will can cause tax inequities. The assets which pass under your Will may carry all the estate tax liability, while the property that passes outside of your Will (such as in joint tenancy and as beneficiary transfers) will pay nothing toward the estate tax bill. If your estate is large enough, there can be a significant distortion of the gifts under your Will.