Since beneficiary designations can get complicated and confusing, many Californians opt to transfer eligible pay-upon-death accounts into trusts—another type of legal arrangement that helps individuals avoid probate while giving them considerably more power to determine how and to whom proceeds must be paid.
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In general, beneficiary designations relate to assets you hold or control and which are subject to pay-upon-death arrangements you’ve made with an institution. Different types of accounts allow—or require—that you name a beneficiary in the event of your natural or untimely death. You may, for instance, select a beneficiary when: 
You can sometimes avoid probate on certain assets through the use of beneficiary designations.
However, when you die, life insurance policies, IRAs, and other such assets are not considered part of your estate. That means, they typically fall outside the realm of probate, unless you’ve specifically bequeathed an account to your estate or another.
If you have a simple estate or relatively few assets, beneficiary designations can help your loved ones avoid probate proceedings after your death. But beneficiary designations can sometimes be the source of unexpected problems. While they can be a powerful tool for anyone planning an estate, they must be used carefully and as part of a broader plan.
You may not have known, for instance, that beneficiary designations can supersede your last wishes. For example, let’s say you have a life insurance policy that will pay a certain amount of money to your spouse upon death. However, maybe your marriage doesn’t work as planned and you get divorced or are on the verge of separation. Since you no longer want your spouse to receive your life insurance proceeds, you meticulously purge her from your will. You decide that the insurance payment will go to your children.
However, a will doesn’t have as much power as you might think. Your life insurance company will most likely not honor your revised will because the pay-upon-death arrangement you already signed automatically falls outside probate’s purview. Other problems may also arise, in the event your designated beneficiary dies young. Thus, if you aren’t careful, beneficiary designations can complicate your last wishes.
Beneficiary designations can be a powerful, simple way to avoid probate on certain assets. However, they must be used wisely and employed as part of a broader estate plan. If you forget about your beneficiary designations, you could leave your family with a complicated situation to deal with.
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