In Nevada, people sometimes make designations of beneficiaries on many different accounts. In fact, the number of places that such a designation is required in estate planning tools may be surprising to our readers. Retirement accounts, insurance plans, 529 college savings funds, bank accounts and mutual funds are just a few of the places that a designated beneficiary is named.
What may be news to some in Nevada is that when life changes occur, many of these accounts continue to have the same designated beneficiaries, regardless of the desire of the person who originally made the designation. The only way to change the designation is to actively make a modification to the accounts. If no change is made and the beneficiary is unable to collect the funds, they may go to the probate process in some cases.
In fact, a recent report says that the designations of beneficiaries can override the directives of some estate planning documents, such as a will. For example, if a named beneficiary remains on an account after a divorce and no change has been made, the same individual would be the person to inherit any funds from that insurance plan. This can also occur in other account types.
Because of the chance that the incorrect individual is named as a beneficiary on an individual account, it is a good idea for people here in Nevada to complete a careful review of all their estate planning documents each year. In fact, it is at this time of year that the review can be most beneficial, as there may be tax implications for some changes made to estate planning documents. To ensure a good outcome, many find it helpful to seek information about estate planning before making any changes.
Source: Forbes, The Big Estate-Planning Goof You May Be Making, Harper Willis, Dec. 16, 2013