Beneficiary provisions should be updated regularly
Many programs and policies have beneficiary benefits and other conditions that are contingent upon the death of the policy-holder. Although a legally executed will is meant to tie all the affairs of the deceased together and distribute assets according to his or her wishes, it is not uncommon to forget to change the stated beneficiary on something such as a bank account, a life insurance policy or an IRA. When someone dies, if they have not updated all their old beneficiary information, their benefits and assets might go to the wrong people.
Over the course of a lifetime, relationships may change. It is possible that a beneficiary might die before the policy holder, and a divorce may also change how an individual wishes to distribute assets. An up-to-date will does not necessarily affect the assortment of other accounts that individuals collect throughout their lives.
During the estate planning process, naming beneficiaries directly to an IRA account can be an excellent strategy. A designated beneficiary of an IRA can save on taxes by withdrawing from the account over the course of their lives. However, if they are not specifically mentioned in the account, then they only have five years to withdraw the full amount and will have to pay all the taxes on it immediately.
Most people are asked to designate a beneficiary when they sign up for an insurance plan or a retirement policy. Similarly, they may have filled out transfer on death certificates when they created a new bank account. All these designations should be reviewed regularly, and the listedheirs & beneficiaries should be updated as necessary.
In order to avoid problems concerning asset distribution after the death of a family member, some families may decide to work with an attorney. That attorney may be able to help clients with estate planning and avoiding the expensive probate process.