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Texas wills: Why reviewing beneficiary designations is important

Estate planning is very important for everyone, but it is also very easy to make mistakes that can keep assets from being distributed as intended. For example, many think that their wills determine who their beneficiaries are. While that may sometimes be true, it generally is not the case if the designated beneficiaries are different on financial accounts such as IRAs, life insurance policies, college savings plans and bank accounts. That is why it is important for individuals here in Texas to review the beneficiary designations on these accounts.

There are myriad reasons why beneficiary designations may need to be changed: the death of the primary beneficiary, the birth of a child or grandchild, divorce or remarriage. However, beneficiaries may also need to be updated if a retirement account is rolled over or the management of assets is taken over by a different financial institution. Another reason to make an update is if the primary beneficiary becomes disabled. In that case, it may be best to set up a trust for that individual and designate the trust as the beneficiary. It is also prudent to designate a secondary beneficiary if one has not been chosen already.

How often should beneficiary designations be reviewed? Once a year is a good rule of thumb, regardless of whether or not there have been any major life changes. February offers an opportune time to do this, since financial institutions are mailing out their tax statements.

Failure to keep beneficiary designations updated can completely undermine an otherwise solid estate plan. Updating wills and other documents must be done carefully and meticulously to ensure that assets go to the people who are meant to receive them. Therefore, anyone in Texas who is creating or updating an estate plan may benefit from seeking assistance with the process in order to avoid any problems for heirs and beneficiaries in the future.

Source: MarketWatch, Don't make the No. 1 estate-planning goof, Harper Willis, Jan. 23, 2014

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