Say the words "estate planning" and most people picture a mansion, a family attorney, and someone reading a will aloud in a wood-paneled office. That picture keeps a lot of families from doing anything at all, because they look at their own balance sheet and decide the term doesn't apply to them.
It does. The moment you named a beneficiary on your 401(k), listed someone on your life insurance application, or opened a bank account with a payable-on-death instruction, you started an estate plan. You may not have thought of it that way. But those forms are live legal directions that will be followed. The only real question is whether the instructions currently on file are the ones you'd choose today.
(New to this? Start with our primer on What An Estate Plan Includes and Why It Matters At Every Income Level, then come back here for the mechanics.)
Your Beneficiary Form Usually Beats Your Will
This is the single most common surprise we encounter, and it's worth stating plainly:
For most retirement accounts and life insurance policies, the beneficiary designation on file with the custodian or insurer controls who receives the money — regardless of what your will says.
A will drafted last year does not override a 401(k) form completed in 2009. If that old form still names an ex-spouse, a parent who has since passed, or no one at all, that's the instruction the plan administrator generally follows. The will never enters the conversation, because the asset never enters probate.
That's why beneficiary review isn't administrative housekeeping. It’s one of the most crucial pieces of most people's estate planning, and worth a look after any of these significant life events or financial decisions:
- Marriage, divorce, or remarriage
- Birth or adoption of a child
- Death of a named beneficiary
- A job change (old employer plans are the most frequently forgotten accounts)
- Rolling an old 401(k) into an IRA — the new account does not inherit the old form
- Any new account, annuity, or policy
Naming a contingent beneficiary matters as much as the primary. If your primary beneficiary predeceases you and no contingent is listed, the asset can default to your estate — which pulls it into probate, the exact outcome the designation was supposed to prevent.
One more reason this deserves attention now. Under the final IRS regulations implementing the SECURE Act, most non-spouse beneficiaries who inherit a retirement account must fully distribute it within 10 years. And where the original owner died on or after their required distribution beginning date, the beneficiary must also take annual distributions during that window. Those rules apply for distribution calendar years beginning on or after January 1, 2025. Who you name — and their tax bracket — carries more weight than it used to. Your CPA is the right person to check that.
So What Does a Will Actually Do?
A will is not the master document most people assume it is; its job is narrower and specific. A will gives the probate court instructions on how to 1) handle the assets that reach probate, and 2) name guardians for minor children.
That second function is not optional and has no substitute. But for the financial side, a will governs the leftovers — assets with no beneficiary, no joint owner, and no transfer designation. Plan well, and that pile is small.
Non-probate assets pass directly to the named person by contract or by statute, bypassing the court entirely. Two designations do most of the work:
Payable on Death (POD) — typically used for bank accounts: checking, savings, CDs.
Transfer on Death (TOD) — used for brokerage and investment accounts, and in Ohio, for vehicles and even real estate.
Ohio is comparatively generous here with regards to TOD. Under Ohio Revised Code § 5302.22, an owner can record a Transfer on Death Designation Affidavit naming who receives real property at death. Ownership passes directly to the named beneficiary without going through probate. The Ohio State Bar Association describes it as a route for owners who want to avoid probate on real estate without setting up a trust.
Two cautions, because this tool is easy to misuse:
1. The affidavit must be recorded with the county recorder before death. An unrecorded affidavit found in a desk drawer accomplishes nothing.
2. TOD real estate is a blunt instrument. It transfers the property; it doesn't manage what happens next among multiple beneficiaries, doesn't handle incapacity, and doesn't coordinate with the rest of your plan. Whether it's appropriate for your situation is a legal question for an Ohio attorney — not a form to download and file on your own.
Ohio does have one meaningful advantage: the state estate tax was repealed for estates of individuals dying on or after January 1, 2013, and Ohio has no inheritance tax. Federal rules still apply.
More on why avoiding the court process is worth the effort: There are No "Pros" of Probate.
Where Life Insurance Fits
For many families, estate planning effectively begins with a life insurance policy — because that's the first time anyone asks them to formally name who receives money after death.
Life insurance does two things well in this context. Under 26 U.S.C. § 101(a)(1), gross income does not include amounts received under a life insurance contract paid because of the death of the insured — so death benefits are generally received income tax free. And because the proceeds pass by contract to the named beneficiary, they generally sidestep probate and arrive when the family needs flexibility most, often while other assets are still tied up.
Both of those advantages depend entirely on having a valid, current designated beneficiary on file. A policy payable to "my estate" gives up much of the benefit. (Note that income tax treatment and estate tax inclusion are separate questions — policy ownership structure affects the latter, which is worth reviewing with your advisor and attorney.)
For Business Owners: Your Buy-Sell Agreement Is Part of Your Estate Plan
If you own part of a closely held business, that interest is likely your largest single asset — and the least liquid. A buy-sell agreement is the contract that determines what happens to it when an owner dies, becomes disabled, or exits. Treat it as an estate planning document, because that is functionally what it is.
Peg the price — then keep proving it
Most agreements set a value or a valuation formula. That's the sound instinct, and it's where most agreements then go stale. A price agreed to when the company did a hypothetical $2 million in revenue is not a defensible number when it's doing $12 million.
Build a periodic valuation review into the agreement itself — annually or on a defined schedule — and document each update in writing. If the value is ever examined, a paper trail of maintained valuations is far stronger evidence than a formula nobody revisited for a decade.
Cross-purchase vs. redemption: the structure matters more than it used to
There are two basic ways to fund the buyout:
• Entity redemption (entity purchase): the company owns the insurance and buys back the deceased owner's shares.
• Cross-purchase: the individual surviving owners own policies on each other and buy the shares personally from the estate.
In June 2024, the U.S. Supreme Court unanimously decidedConnelly v. United States, 602 U.S. ___ (2024), and it reshaped this analysis.
The facts are instructive. Michael and Thomas Connelly were the sole shareholders of Crown C Supply, a small building supply corporation. Their agreement gave the surviving brother the option to purchase the deceased brother's shares personally — and if he declined, the corporation itself was required to redeem them. Crown funded that obligation with $3.5 million of company-owned life insurance on each brother.
When Michael died, Thomas elected not to purchase the shares, which triggered Crown's redemption obligation. Crown redeemed Michael's 77.18% stake for $3 million.
The IRS disagreed with that number. It valued Crown at $6.86 million — the $3.86 million appraised value plus the $3 million in insurance proceeds, counted as a corporate asset — making Michael's stake worth roughly $5.3 million and generating an additional $889,914 in estate tax.
The Court affirmed. A corporation's contractual obligation to redeem shares is not necessarily a liability that reduces the corporation's value for federal estate tax purposes. The insurance proceeds counted as an asset, and the redemption obligation did not offset them.
The practical upshot: in a redemption structure, the very insurance purchased to solve a flexibility problem can inflate the taxable value of the deceased owner's interest.
A hybrid agreement offers no automatic protection.
In Connelly, the cross-purchase option existed — it simply wasn't exercised, and the fallback redemption was triggered. The Court closed by noting that the outcome "is simply a consequence of how the Connelly brothers chose to structure their agreement." Structure decided the tax bill. If your agreement has a redemption fallback, that fallback is the outcome you should be planning around.
The basis advantage in a cross-purchase
The second reason many advisors now favor cross-purchase is basis. Here's how that precisely plays out:
When a surviving owner personally buys the deceased owner's shares from the estate, the buyer's cost basis in those newly acquired shares equals what they paid — full fair market value. This is a step-up in basis for the new shares purchased. Years later, if they sell, gain is measured from the step-up in basis on the shares purchased from the deceased owner.
In an entity redemption, the company buys the shares and retires them. The surviving owners now own a larger percentage of the business, but their basis in their original shares is unchanged. Their eventual taxable gain is measured from their old, lower basis.
Rough illustration: a survivor whose shares carry a hypothetical $200,000 basis and are eventually worth $600,000 faces gain on $400,000 under a redemption. Had they instead purchased the deceased owner's shares outright for $500,000, that block carries a $500,000 basis, and gain on a later $600,000 sale would be measured from there. Same business, materially different tax outcome on exit.
A clarification worth making, since this gets stated loosely in the industry: the estate generally receives a stepped-up basis in the decedent's interest at death under IRC § 1014, which is why the estate typically recognizes little or no gain on the sale itself. The buyer's benefit is different — it's a cost basis at full purchase price, which reduces capital gain on a future disposition. Both are real; they're just not the same thing, and conflating them leads to bad expectations.
The honest trade-offs
Cross-purchase is not automatically the right answer:
• Policy count grows fast. A cross-purchase needs n × (n − 1) policies — 3 owners require 6, 5 owners require 20, 10 owners require 90.
• Unequal premiums. A mix of younger and older owners means very different premium burdens on each other's lives.
• Transfer-for-value risk. Simply moving existing company-owned policies to individual owners can run into the transfer-for-value rule of IRC § 101(a)(2), which can limit the normally tax-free death benefit exclusion. The exceptions are narrow — transfers to the insured, to a partner of the insured, to a partnership in which the insured is a partner, or to a corporation in which the insured is a shareholder or officer.
• Alternative structures — such as an insurance LLC taxed as a partnership — attempt to capture cross-purchase treatment with fewer policies, but carry their own documentation requirements and IRS scrutiny.
As you can see, none of this is a do-it-yourself project. It requires your attorney, your CPA, and your financial professional working from the same set of facts.
Will Estate Taxes Even Apply to You?
For most families, no. For 2026, the federal basic exclusion amount is $15,000,000 per person, up from $13,990,000 for 2025, per IRS inflation adjustments. The annual gift tax exclusion for 2026 remains $19,000 per recipient.
Ohio adds no state estate or inheritance tax.
So if your estate is well under that threshold, estate tax minimization isn't your priority. Your priority is in the details: current beneficiaries, contingent beneficiaries, TOD/POD designations, and clean transfer instructions. If you're near or above the threshold — or you own a business whose value may be higher than you assume, especially after Connelly — the tax conversation becomes real and should involve an estate attorney and tax professional.
Review What's Actually on File
Most of the work here isn't complicated — it just gets filed and put away. Pull your beneficiary designations, check your contingents, and see whether your transfer instructions match your intentions today. If you own a business, add the buy-sell agreement to that list.
Centric Financial Group works with individuals, families, and business owners in Columbus, Ohio to review beneficiary designations, coordinate transfer strategies, and align business succession planning with the rest of the financial picture — in coordination with your attorney and tax professional.
Call (614) 824-6100 or request our Estate Preservation guide to start the review.
Frequently Asked Questions
Does my will override my 401(k) beneficiary form?
Generally, no. For most retirement accounts and life insurance policies, the beneficiary designation on file with the plan administrator or insurer controls. That's why reviewing those forms matters as much as drafting the will.
Do I still need a will if everything has a beneficiary or TOD designation?
Most likely yes. A will names guardians for minor children and directs any asset that has no designation, no joint owner, and no surviving beneficiary. Designations also fail — beneficiaries predecease you, forms get lost in custodial transitions. A will is the backstop.
Are life insurance death benefits taxable?
Death benefits paid to a named beneficiary are generally received income tax free under IRC § 101(a). Estate tax inclusion is a separate question that depends on policy ownership. Confirm your specific situation with a tax professional.
How often should a buy-sell agreement be updated?
Review the valuation on a defined schedule — many owners use annually — and document each update in writing. Also revisit the structure itself after Connelly, particularly if your agreement is a company-funded redemption or a hybrid agreement with a redemption fallback.
Isn't estate planning only worth it if I have a lot of assets?
Everyone participates in it. If you've named a beneficiary anywhere, you have a plan in force. Choosing it deliberately is the difference.
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This material is for informational and educational purposes only and is not intended as legal or tax advice. Centric Financial Group and its representatives do not provide legal or tax advice. Federal and state laws are complex and subject to change; the information reflects our understanding as of August 2026. Please consult a qualified attorney and tax professional regarding your individual circumstances before acting on any strategy described here.
Life insurance guarantees are subject to the claims-paying ability of the issuing insurance company. Product availability, features, and tax treatment vary. Neither the strategies discussed nor any product referenced is suitable for all investors.
This information is not intended to be used – and cannot be used – to avoid penalties under the Internal Revenue Code.
All numeric examples and any individuals shown are hypothetical and were used for explanatory purposes only. Actual results may vary.
Prior to rolling over any plan assets to an IRA, an individual should carefully consider various factors such as investment options, fees and expenses, services, penalty-free withdrawals, protection from creditors and legal judgments, required minimum distributions, and employer stocks depending on individual needs and circumstances.
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