During my years working in financial and retirement planning, one thing became very clear: many people don’t understand the stamp duty and costs their estate will face when they die.

I often had to explain it with a simple example. Imagine all your assets combined are like an onion, with three layers you have to peel away before you get to the good part.

The first layer you peel away is the stamp duty that needs to be paid.

The second layer is the fees for lawyers for administering the estate.

The third layer is the fee the executor charges for all the work they have to do.

Once those layers (or costs) are peeled away, what's left of the onion (your estate) will certainly be a bit smaller.

Now, don't get me wrong, there are creative wealth planning structures to minimise these costs; however, for the average person, planning your estate is a simple process: go to a lawyer, draft a will, and make sure you name your beneficiaries — the people or charities you want to receive your assets when you die.

Just before I get into the nuts and bolts of the article, it is important to note I am not a lawyer, and should you wish to make any changes, always seek legal advice first.

With that said, here is one concept that you can use to help minimise those fees and maximise your estate, and it is specific to life insurance and pension plans.

The concept is designating a named beneficiary as opposed to your estate on your life insurance policies and pension plans. This is a strategic financial decision that offers numerous advantages, particularly when it comes to bypassing the often lengthy and sometimes complex probate process.

One of the primary benefits of designating a named beneficiary for a registered product (life insurance and pensions) is the ability to bypass probate entirely.

For those who are unsure of what probate is: probate is the legal process for dealing with a deceased person's estate. It involves paying off any debts and then distributing the remainder of the estate to the heirs and beneficiaries. The challenge with probate is that the process is slow and usually involves fees.

Designating named beneficiaries for your life insurance policies and pension plans allows the proceeds to be paid directly to those individuals upon death, often within a week or two, without the need for probate, without the need for lawyers, and without the need for an executor. This rapid transfer can be critical for families relying on these funds for ongoing expenses or to cover immediate financial obligations.

On the other side of the coin, assets without a designated beneficiary will typically become part of the estate and must go through probate before they can be distributed. As mentioned previously, this process takes time and, depending on the complexity of the estate and probate laws, it can sometimes take years before probate is finalised.

However, during the probate period, the assets are frozen and cannot be accessed or transferred, which can cause financial hardship for surviving family members who may need immediate funds for living expenses, medical bills, or other urgent needs.

Another advantage of designating named beneficiaries on life insurance and pension plans, as opposed to your estate, is the preservation of privacy.

Probate proceedings are public legal processes, meaning that details about the deceased's estate, including assets, debts, and beneficiaries, become part of a public record. There is no skirting around it; it is part of the probate process.

Therefore, for many individuals, privacy is a priority, especially when they wish to keep the distribution of their estate confidential. By designating beneficiaries directly on insurance policies and pension plans, the transfer of assets remains private, as these designations are not part of the public probate record.

This privacy can be particularly valuable for those who prefer to keep their financial affairs discreet and perhaps have a few skeletons in their cupboard that need to remain private.

Another benefit of naming a beneficiary on life insurance and pension plans is that it provides clarity and certainty in the distribution process. When a beneficiary is named, there is a clear and legally binding instruction for where the assets will go.

These named beneficiary designations are absolute, meaning these designations supersede a will. Now, while the owner of the life insurance policy and/or pension plan is alive, they can change named beneficiaries; once they die, whoever is listed as the named beneficiary is the legal heir to those proceeds.

Often this is where it can sting: a spouse forgets to update the named beneficiary and still has their ex-partner listed, the spouse dies, and the ex-partner is legally entitled to those proceeds.

An outdated beneficiary designation can inadvertently direct your assets to an ex-partner or leave out a new child, causing lengthy legal disputes and a fractured family. Therefore, it goes without saying that keeping beneficiaries up to date is critical; however, updating named beneficiaries on life insurance policies or pension plans is often overlooked or forgotten because the focus is typically placed on your entire estate, not on specific products.

I always recommend regular reviews of all your beneficiary elections, ideally after every major life event, or make it part of your checklist when updating your net worth statement once per year. This way, you will ensure your legacy is distributed exactly as you intend.

We all work hard and sacrifice to build a secure future. Protect what you’ve earned. By putting thought into your beneficiary choices, you ensure your dedication pays off for the people you love and / or charities you support.

• Carla Seely has 25 years of experience in the international financial services, wealth management, and insurance industries. During her career, she has obtained several investment licences through the Canadian Securities Institute. She holds the ACSI certification through the Chartered Institute for Securities and Investments (UK), the QAFP designation through FP Canada, and the AINS designation through The Institutes. She also holds a master's degree in business and management