If you have drafted a will, you may think that it dictates who inherits all of your assets and how those beneficiaries will split them. But if you are not careful, the bulk of your assets could end up being distributed in very different ways than you intended.

Example: Beneficiaries you designate for life insurance policies… certain investment accounts, such as 401(k)s and IRAs… and even US savings bonds… take precedence over those you name in your will.

Some of the biggest mistakes…

NAMING THE WRONG BENEFICIARIES

MISTAKE: Naming your estate as beneficiary. If you name your estate as beneficiary of your retirement account or life insurance (or don’t designate a beneficiary at all), these assets will be subject to probate, a time-consuming and expensive legal process in which a court oversees the payment of debt and distribution of assets. Creditors will be able to make claims against these assets during the probate process. Also, your heirs will not have the option of allowing the assets in your tax-advantaged retirement plans to continue to grow on a tax-deferred basis. That’s because tax laws allow human beneficiaries to withdraw money from inherited IRAs slowly, based on their remaining life spans, while estates do not have this right.

Example: Tom, 71, named his estate as beneficiary of his life insurance policy. The $500,000 payout was tied up in probate for nearly a year, and probate fees totaled $25,000.

What to do: Name a spouse or child as beneficiary, or name several children as co-beneficiaries.

MISTAKE: Naming a trust as beneficiary of a retirement account when there are significant differences in the ages of the heirs.

Snag: The designated beneficiaries of your tax-advantaged retirement accounts can choose to allow these funds to continue to grow tax-deferred after your death. The beneficiaries are required to make withdrawals based on their own estimated remaining life spans, which means many decades of tax benefits for younger beneficiaries. When a tax-advantaged retirement plan’s designated beneficiary is a trust, all of the trust’s beneficiaries must make withdrawals based on the age of the oldest beneficiary.

Example: Martha wanted her three children, ages 38, 40 and 58, to receive her IRA funds after her death. Had her children been named the account’s beneficiaries, the younger two would have reaped the benefits of tax-free growth for decades. Because Martha named a trust as beneficiary and her children as the trust beneficiaries, the two younger children had to take faster withdrawals based on the estimated remaining life span of the oldest sibling.

What to do: Name beneficiaries directly in retirement accounts, and take those designations into account when apportioning other assets to beneficiaries in your will.

OMITTING KEY STEPS

MISTAKE: Failing to obtain a spousal waiver for your 401(k) account if you do not wish the assets to go to your spouse. If you are married, by law your spouse is the beneficiary of your 401(k), even if your will or a prenuptial agreement says otherwise.

Example: Harold, 65, remarried after the death of his first wife. His new wife, Gwen, 62, had assets of her own and signed a prenuptial agreement stating that Harold’s savings should pass to his children from his first marriage. But because Gwen did not also sign a beneficiary waiver for Harold’s 401(k), those assets still passed to her.

What to do: Obtain a signed waiver from your spouse.

MISTAKE: Ignoring “transfer on death” (TOD) opportunities. In most states, it is possible to name a TOD beneficiary for an investment or bank account and, in some states, for a home and/or car. This is comparable to joint ownership except that the TOD beneficiary does not have any control until the owner dies. Naming TOD beneficiaries can be a good way to help your beneficiaries avoid the time and expense of probate. Ask your brokerage house, mutual fund company or bank for the necessary forms.

Example: Sally, a 73-year-old Arizona resident, wanted her home to pass directly to her only son, Kevin, when she died, without the expense of probate. She could have named Kevin co-owner of the home, but that would have put the home at risk if Kevin divorced or was sued. Instead, Sally signed and recorded a new deed that listed Kevin as TOD beneficiary.

What to do: Consider TOD designations if they are available in your state. For TOD rules in your state, check www.nolo.com (click on “Wills & Estate Planning,” then “Avoiding Probate in Your State”).

FAILING TO UPDATE

MISTAKE: Overlooking the descendants of deceased children in beneficiary designations for retirement plans, life insurance policies and savings bonds. Parents with several adult children often designate their children as equal beneficiaries. Unfortunately, this seemingly fair system becomes inequitable if one of the adult children dies before the parents do. In such cases, the children of the deceased child could get nothing.

What to do: Use your will to help balance out distributions. Example: Leave your surviving children as the only beneficiaries of your life insurance policy. Then name the children of your deceased child as beneficiaries of an appropriate amount in your will, to balance how much they get with how much your living children get. Include an explanation in the will of why this was done so that no one feels unfairly treated. Alternatively, you could put money into a bank account naming the grandchildren as beneficiaries “payable on death” of the account holder.

MISTAKE: Forgetting to update beneficiary designations when you marry, divorce or are widowed. Even those who remember to update their wills when they gain or lose a spouse may forget to update retirement plan and life insurance policy beneficiary designations.

What to do: Contact your investment and life insurance companies to ask how to update your beneficiary designations, or ask your estate-planning attorney for assistance. To update the “co-owner” or beneficiary designations on US savings bonds, contact the Federal Reserve Bank (800-245-2804, www.treasurydirect.gov) to obtain the forms necessary to have the bonds reissued.

MISTAKE: Purchasing savings bonds in unequal amounts for grandkids. Grandparents who purchase savings bonds for their grandchildren every year might accidentally leave significantly more to some than others. When the grandparents pass away or no longer can afford to purchase savings bonds, older grandkids often have been named beneficiaries on many more bonds than younger ones.

What to do: As new grandchildren are born, buy savings bonds only for them until they catch up with older ones.