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Beneficiary designations important in estate planning

On Behalf of | Sep 1, 2011 | Heirs & Beneficiaries

We recently said estate planning in Nevada involves more than just making a will. One area that is often overlooked is a periodic review of beneficiary designations on various insurance policies and other potential assets. Recent court cases that have culminated in decisions from the U.S. Supreme Court emphasize the importance of reviewing these designations and changing them as circumstances require. It is a necessary part of proper estate planning.

Typically, the beneficiary designations that need to be investigated include bank accounts, brokerage firm accounts, tax-favored retirement accounts and company benefit plans. They also extend to life insurance policies, annuities and 529k college accounts.

First, it is important to see if the appropriate forms have been submitted for beneficiary designation in the first place. If not, it needs to be done. If so, it is a good practice to review the designations every year, so that beneficiaries may be adjusted as life circumstances change. Many people choose to do this at the same point each year, such as tax season. This makes it easier to remember.

This is particularly true in the event of a divorce. A divorce judgment often includes a provision that each party specifically waives all rights in life insurance plans, company benefits and other assets. Nevertheless, the U.S. Supreme Court has said a beneficiary form takes precedence over a divorce judgment. This is especially true concerning life insurance, so if an old insurance policy still names an ex-spouse, he or she may very well get the proceeds no matter what the divorce papers say.

Nevada is one of nine U.S. states that have community property laws. As such, spousal consent is normally required before a change in beneficiary designation can be made. The law generally considers those assets to be owned equally. If the accounts currently provide for joint ownership with right of survivorship, one may want to add secondary beneficiaries to designate what will happen if one’s spouse dies first.

The best estate planning practice is to review every aspect of the plan with regularity. Sometimes circumstances or laws change that may impact the manner in which an individual desires to have the estate divided. In Nevada, an attorney dedicated to helping people plan for proper distribution and administration of their estates may help devise a plan that best suits your particular family situation.

Source: The Smart Money, “Make This Estate Planning Move Now,” Bill Bischoff, Aug. 10, 2011.