Estate Administration: How to Pass Assets on to Heirs

Assets transfer to heirs either by operation of law (bypassing probate) or through the probate estate. Non-probate assets include:

Designated Beneficiary Accounts

Life insurance, IRAss, 401(k)s, and other qualified retirement plans transfer directly to named beneficiaries. You must specify secondary (contingent) beneficiaries. Utilizing a per stirpes (by branch of the family) rather than per capita (by head) designation ensures that if a beneficiary predeceases you, their share passes to their children rather than being divided among the surviving named beneficiaries.

Joint Accounts

Accounts held as joint tenancy with rights of survivorship or tenancy by the entirety transfer automatically to the surviving co-owner. However, adding a non-spouse co-owner is a taxable gift equal to the value of the asset transferred (see IRC §2501) and exposes the account to that co-owner’s liabilities, lawsuits, and creditors.

Pay-on-Death (POD) and Transfer-on-Death (TOD) Accounts

You retain complete control during your lifetime. Upon death, the financial institution transfers the funds directly to the beneficiaries. In California, these transfers are authorized under California Probate Code §5000.

Regularly review your beneficiary designations. Paperwork filed with financial institutions overrides any instructions in your will. If a will directs an account to a child, but the account’s beneficiary form designates an ex-spouse, the financial institution will distribute the funds to the ex-spouse. Under California Probate Code §5000, these designations are non-probate transfers that pass outside of the court’s jurisdiction. If you fail to name a beneficiary, the asset defaults to your estate, forcing it through probate.

Because these forms silently override your will and trust, audit them on a schedule—at minimum after every marriage, divorce, birth, or death, and otherwise every few years. Pull up each of the following and confirm both the primary and the contingent beneficiary:

• Retirement accounts: every IRA, 401(k), 403(b), and pension.
• Life insurance policies and annuities.
• Bank accounts (POD) and brokerage accounts (TOD).
• HSAs and, where offered, 529 plan successor owners.
• Employer benefits—group life, deferred compensation, stock plans—which often default to a form filed years ago and never updated.

Three traps recur. A stale form leaving everything to an ex-spouse is the classic and the courts will enforce it. Naming your estate as beneficiary drags the asset into probate and, for retirement accounts, can collapse the payout into the five-year rule. And naming a minor or a person on needs-tested benefits outright triggers a conservatorship or destroys their eligibility—route those shares to a trust or custodial account instead (section “Special Needs Trusts”).