Beneficiary designations

On Behalf of | May 3, 2016 | Blog

Nevada residents who have assets such as insurance policies and retirement accounts likely filled out a beneficiary designation form when those assets were acquired. In many cases it will be the spouse who will be named, but other individuals can be beneficiaries as can trusts and charitable organizations. However, minor children cannot be named under a life insurance policy or retirement plan.

When naming a beneficiary, it may be worthwhile to consider the tax implications of an asset transfer. While a spouse may be able to roll proceeds from a retirement plan to his or her own account, others may be required to take distributions and pay taxes on them. In addition, the value of cash or assets inherited by someone will be added to that person’s existing estate. Therefore, a beneficiary may be faced with an estate tax bill if the inheritance is not properly handled.

Those who have special needs relatives may consider giving them a larger portion of their estates. By setting up a special needs trust, it may be possible to transfer cash or assets to that person without jeopardizing their government benefits. A trust providing for timed distributions may also be useful if a beneficiary is unable to properly handle the receipt of a lump sum.

It is important to know that beneficiary designations override language to the contrary in a will. Accordingly, it is advisable to conduct periodic reviews of both the will and any beneficiary designations to make sure that they are in sync. In addition, estate planning attorneys will advise their clients that such a review is also important when there are life changes such as a divorce or the birth of a child or grandchild.