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The importance of updating beneficiary designations

Family changes can happen unexpectedly, and Nevada residents who fail to update beneficiary designations after such occurrences could create unfortunate results for their heirs. It is not enough to simply update a will or other parts of an estate plan without also taking time to review accounts that require the listing of a beneficiary. A beneficiary designation will override any details in one's will.

Will and trust planning tend to garner the majority of a person's attention during the estate planning process. However, a significant part of an estate may include retirement accounts, pension plans and life insurance policies. Each of these assets requires a beneficiary designation, which can only be overridden by a new beneficiary designation. Failure to name a beneficiary could cause the assets in an account to be paid to the owner's estate, but there is no guarantee that the intended heir would receive the funds as anticipated. Changes should be made promptly if a named beneficiary dies. Changes are also recommended in case of a divorce.

In some cases, individuals decide to name their trusts as beneficiaries of certain accounts. This can allow for more strategic asset distribution to heirs, especially if those heirs might be likely to make tax mistakes in withdrawing assets from an IRA or other inherited account. Additionally, some individuals decide to name charities as beneficiaries when major tax obligations are a concern.

Because the financial scenarios can be varied, reliable estate planning guidance is important. A lawyer may help in the initial planning process, but regular reviews are important for addressing changes in the law, in estate tax exemptions and in the relationships with one's heirs.

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