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Can Beneficiary Designations Replace a Trust?

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Living trusts are a straightforward way for people to pass their assets on to their intended beneficiaries upon death and a way to bypass probate. They have become more and more popular over the last decade for these reasons. However, for some people, a question arises: Can beneficiary designations replace a trust?

The idea behind the question centers on the idea of accomplishing the same goal as a living trust without having to set up a trust. First, let us take a look at what beneficiary designations are. 

What Are Beneficiary Designations?

There is a good chance you already have some beneficiary designations set up. For instance, if you have a retirement account at work, chances are that you had to name a beneficiary for the account. Transfer-on-death or payable-on-death designations also serve to move an account or asset out of probate upon the owner’s death. Likewise, a joint tenancy with right of survivorship serves a similar purpose for real estate.


While these may sound like perfectly good options that can be useful, there can be issues. That’s why they don’t take the place of a trust, even though they may do many of the same things. Here is why:


All of the devices mentioned above – beneficiary designations, joint tenancies, payable-on-death, and transfer-on-death – rely on having another person take control of your assets upon death. However, as we all know too well, death can be unpredictable. If your beneficiary passes away before you do, the designation may not result in your goal of transferring the asset.

What Is A Contingent Beneficiary?

A contingent beneficiary is someone who can take the asset should the intended beneficiary die. In circumstances where there is no contingent beneficiary or the contingent beneficiary dies before you, the asset will most likely enter probate, which is what you’re trying to prevent.

What Happens In A Joint Tenancy?

Other problems can come up, as well. For instance, in a joint tenancy, let’s say you’d like to leave a house to your daughter. In this situation, she outlives you, and everything should work out, correct? The house will go to whoever survives, which is good. However, because your daughter has been named as a joint tenant, the asset now becomes hers, as well as yours. Hypothetically, if she were to be sued and lose, a judgment creditor may be able to put a lien on the property.

Should I Set Up A Living Trust?

While that may be an extreme example and your family members may be in good health, avoid accidents, and generally unlikely to be sued, you may need help to manage your assets while you’re still alive. For this reason, a trust is a better option than beneficiary designations. There may come a time, as unpleasant as it is to think about, where you’ll become legally incapacitated due to an illness. Beneficiary designations only transfer assets upon your death. They don’t designate a trusted person to manage your assets while you’re still alive.

In the end, our estate planning attorneys at The Mattar Firm can set up a living trust that helps protect your assets should you be incapacitated in life while also transferring your assets on your death. Any assets you have – cars, bank accounts, homes – can be placed into the trust. While alive and healthy, you’re able to manage these assets the same as if you just owned them outright. Should the unthinkable happen, your trustee or trustees will be able to step right in and make decisions on your behalf.
In the event of your death, the assets will be divvied up according to how you planned through the trust instrument. A living trust offers protection and flexibility that beneficiary designations do not. They have their place, of course, but for serious end-of-life planning, a living trust offers much more.

Contact The Mattar Firm

At The Mattar Firm, our experienced estate planning attorneys can help you set up a living trust or to decide if beneficiary designations should replace a trust. Contact our estate planning attorneys now at 239-222-2222.

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