Maybe, but probably not.  A plan like this may work in some situations, but in most cases it fails to cover many contingencies which may occur, with disastrous results.  For example, if the person you designate on a beneficiary designation or signature card dies before you do and you do not change the designation, the property could go to someone you don't want.  A well-drafted will covers many more contingencies.  Also, if the person who ends up with the property is a minor or an incapacitated person, insurance companies, brokerage firms and banks will not pay proceeds to or transfer assets without a guardianship or trust.  A well-drafted will may contain a trust for minors and incapacitated persons, but without that trust an expensive, cumbersome guardianship is the result.  (Click here for more information about guardianships.)  There also are potential negative tax consequences of using only beneficiary designations or pay-on-death designations to pass property at your death.  For example, if your estate is a taxable estate for federal estate tax purposes, a well-drafted will can provide for creation of a trust after your death to save taxes.  If you do not have a will, your loved ones could end up paying estate tax which may have been avoided if you had a properly drafted will.

Last updated on January 6, 2011 by Glenn Karisch