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District of Columbia estate planning: Reviewing beneficiaries

Many District of Columbia residents have been contributing to their retirement plan and paying into their life insurance policies for a number of years. When the accounts were first opened or purchased, there wasn't much in them. Now, there could be a significant amount of money in those accounts. Without proper estate planning, this could have adverse tax implications for the beneficiaries.

Without careful planning, the recipient of the funds from a retirement account or insurance policy could end up giving a hefty portion of those funds to the United States government in the form of taxes. Outside of tax issues, receiving such a lump sum inheritance could interfere with the recipient's lifestyle. There may be a risk of the proceeds having to be shared with a spouse, current or former, or creditors.

The beneficiary may also be somehow disabled and receiving benefits for that disability. Receiving an inheritance could interfere with those payments. Directing the proceeds of the account into a trust for the intended beneficiary could alleviate these problems when the owner passes away.

Many people in the District of Columbia forget about their beneficiary designations on retirement accounts and insurance policies once they are made. However, they should be reviewed periodically right along with other estate planning documents. The purpose is twofold: first, it should be done to ensure that the beneficiary designation is still valid, and second, to be sure that the beneficiary won't be overwhelmed by the receipt of the proceeds. Our lives are in a fairly constant state of transition, and many people fail to realize that their estate plan needs to keep up with the pace of our life changes.

Source: dailynewstranscript.com, Baler: Five reasons to review beneficiaries, Maria C. Baler, Sept. 1, 2013

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