Most of us would like our nearest and dearest to inherit the money and assets we have accumulated over our lifetimes. Making certain that this happens is not as simple as it seems. Naming beneficiaries is a distinct decision-making process that may have significant repercussions on loved ones if not thought through. Here are some suggestions to think about when designating beneficiaries.

Assets such as retirement plans, annuities and life insurance policies can be given to beneficiaries and anyone or anything can be a beneficiary, including individuals, charities and trusts. When naming a beneficiary, those assets can pass directly to whomever is designated because they do not have to go through probate, which can be a lengthy and expensive process.

Also, beneficiary designations will override bequests made in a will, so remembering to update a will is key, especially with major life events such as marriage, divorce, the birth of a child or death of a loved one. Hard feelings and disagreements in the family can occur if designations are not clarified well. Plan to review beneficiary designations on a regular basis, ideally as part of an annual finance review.

Before making beneficiary designations, be aware that inheriting assets is apt to have tax ramifications for those receiving, such as loved ones. If making someone other than a spouse the beneficiary of a company retirement-plan asset, he or she may have to take mandatory distributions from that plan and in turn, pay taxes on that money. A spouse, on the other hand, will be able to roll over those assets into their own IRA and will not have to pay taxes until distributions begin.

Estate taxes may increase if someone other than a spouse is designated as a beneficiary. The amount will be included in the value of the estate if the beneficiary is not a spouse and increase the estate-tax liability. If the beneficiary already has a large amount of assets, adding onto it could create and compound an estate-planning nightmare for him or her. Any inherited assets will be included in that person’s estate, and if the taxable estate is above a certain threshold at the time of their death, their heirs will owe estate tax. Again, a spouse will not owe estate tax on assets inherited but their heirs will owe estate tax on those monies upon the spouses’ death, however.

A trusted friend or relative may be a tempting person to name as a beneficiary with the assumption that that person would know how to distribute assets in accordance with what is in a will. It is advised against because there is the possibility that that person will not know precisely how to distribute those assets or they could decide to keep the assets for themselves. Also, if they are honest and distribute the inherited assets accordingly, those assets will still be considered part of that person’s estate when he or she passes away and taxed as well.

Another suggestion is to give special consideration to special-needs loved ones. A desire to make sure that any physically or mentally disabled loved one is well provided for is normal but remember that a direct transfer of assets to him or her could affect the individual’s eligibility of government-provided benefits. In addition, if the person is mentally disabled, he or she may not be able to manage the assets. Consulting with an attorney who specializes in estate planning and setting up a Special Needs Trust may be recommended.

Designating beneficiaries is one of the first steps in creating an estate plan and creating a will is another. Discuss the above considerations with loved ones before naming them as beneficiaries. Help them understand what comes with an inheritance and the responsibility it will need. Planning ahead, updating an estate plan, and communicating are key processes when ensuring that assets will go to the right people and places.