Why it matters
For many assets, such as life insurance and retirement accounts, naming beneficiaries usually supersedes your will—the ones you designate receive the proceeds, no matter what the will says.*
Naming a beneficiary for certain accounts helps them bypass "probate," the process where a court reviews, approves or disapproves the will, then allows your heirs to distribute your estate assets and debts.
Probate can be a time-consuming, stressful process for loved ones that leads to disputes. It's costly, too, since they'll probably need to get a lawyer involved. Depending on state community property laws, which may split an inheritance between spouses and heirs, it can also be complex.
By naming a beneficiary, you may also be able to help prevent your retirement savings from being taxed when they're transferred. (This can vary, so check with a legal or tax expert to see what's best for you.)
*But not always; in some cases, state laws rule.
Types of accounts with beneficiaries
You typically can name beneficiaries for retirement accounts, life insurance policies and checking and savings accounts. Other assets, like your car title or house deed, may also allow it. (This varies by state and can happen through a "transfer-on-death" or "beneficiary deed.")
You may need to submit a beneficiary form to local or state agencies, but rules can vary widely based on where you live. Check your state's department of motor vehicle services and property agency to learn more.