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 As busy professionals, caregivers, and the like, we tend to put off until tomorrow that which isn't deemed critical today.  One such item that we cannot afford to delay is the filing of a beneficiary designation form.

A beneficiary designation is a form of will substitute. It allows you to transfer certain assets, such as the proceeds of a life insurance policy or a retirement plan/IRA, without going through the probate process. Probate can be a lengthy and costly process. Assets that pass through probate may take a year or more to reach your beneficiaries. There's also the chance that the funds may not reach the people you intended. Finally, probate records are available to the public, so knowledge of how you've bequeathed your estate is available to anyone who has an inquiring mind.

Some tips to keep in mind:

• The person (or trust, etc.) that you select to receive the proceeds is called a beneficiary. This choice may vary depending on whether you're married or single.  You can also name a charity, your estate, or a trust as the beneficiary of many retirement plans.  However, before doing so, you should discuss this with your CPA and/or attorney.  Keep in mind that some retirement plans require you to name your spouse as the beneficiary, unless he or she signs a written waiver consenting to your choice of another beneficiary.

• Frequently, many choose to name a minor as the beneficiary of a retirement account. You could name your children (if you're a single parent), your grandchildren, or a friend or relative. Even if you don't name a child as your primary beneficiary, you may want to name one as a secondary beneficiary.

If you name a child as a beneficiary, you should also appoint an adult to act as guardian of the money. Otherwise, if you die while the child is still a minor, the child's parents may have to petition the court to act as guardians. If the child's parents are no longer alive, the child's court-appointed guardian will handle the money, and this process can be costly, time-consuming, and intrusive (just like the probate process!).

• If you're married and want to name another adult as beneficiary, your spouse would have to consent to this.
• You may also name a charity (i.e., house of worship, hospital, college) as beneficiary of your retirement account.  In some cases it's best not to name a trust as the beneficiary. Those of you with a revocable living trust don't need to name it as a beneficiary in order to avoid probate. As long as you name a beneficiary (other than your estate), the funds won't go through the probate process anyway.  You should try and avoid naming your estate as beneficiary. If you do, the funds will go through probate before being distributed. In addition, there may be unfavorable income tax consequences of naming your estate as beneficiary.
• You can name anyone (except for your employer in a group term life policy) as the beneficiary of your life insurance policy. Many people choose a family member or child, but that's not required. You can also name a charity or a trust.  Also, for certain assets such as a bank account, you could transfer assets under beneficiary designations known as  transfer on death or payable on death.

It's easy to designate a beneficiary and it costs nothing. You simply file the appropriate form with your plan administrator or your life insurance company.  Make sure that you use the official beneficiary designation form provided by the retirement plan, insurance company, bank, etc.  Most importantly, since many life changing events (divorce, death, your daughter marries someone that brings shivers down your spine) may occur in one's lifetime, it's very important to confirm that all of your beneficiary designations are current.  This exercise should be performed at least every few years, but certainly after every such occurrence.  It's also important to check your secondary beneficiaries, especially with IRA accounts, since this may have future income tax ramifications.

Assuming you didn't name your estate or executor as beneficiary, the proceeds of a life insurance policy or a retirement account avoid probate. These funds pass automatically to your beneficiary at your death.  Keep in mind that, generally speaking, the proceeds of a life insurance policy are not subject to income tax, and the opposite is the case for retirement plans, other than, for example, qualified distributions from a Roth IRA/401(k).

After your passing, your beneficiary can use the funds as he or she pleases, unless you use a trust. A spouse may remarry, or may change his or her mind about providing for the children from your first marriage. If this is a concern, consider naming a trust as the beneficiary.  However, this may have negative income tax ramifications.

It's important to note that your beneficiary designation will "trump" what you've provided for in your will or even divorce decree.  In one recent case, an ex-spouse collected the proceeds of a retirement plan, even though she waived any interest in the plan in the divorce agreement.  The deceased neglected to complete a new beneficiary designation form, so instead of his daughter receiving the money, it went to his ex-wife. 

Finally, you can generally name more than one person as your beneficiary, subject to certain spousal rights for some retirement plans. If you do this, your beneficiaries will receive equal shares unless you indicate otherwise.