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Beneficiary designations almost always override a will

Many District of Columbia residents open accounts that pass to heirs by operation of law upon death. Accounts such as retirement accounts, insurance policies and mutual funds fall into this category along with some others. What many people either do not know or tend to forget is that the beneficiary designations for these accounts almost always override an individual's will.

Therefore, it is important that these forms are reviewed from time to time to ensure that the person or persons listed as beneficiaries are still who the account holder wants to inherit the proceeds of the account. Something as simple as a yearly calendar reminder can save family members confusion and confrontation after an individual passes away. In addition, if a major life change such as a marriage, divorce or birth of a child occurs, that is also a good time for a review. Just as important, however, is that the forms are filled out correctly.

For instance, a man wanted his IRA to be distributed among his children. When he filled out his beneficiary designation, he stipulated that it should be distributed in accordance with his will. Unfortunately, this was not a valid way to fill out the form, and even after a court battle by his children, the man's wife of two months inherited the proceeds of the account by default. Heirs must be named specifically on the forms. It is acceptable to use percentages next to the names if there are several people listed along with legal designations such as "per stirpes" or "in equal shares."

These seemingly simple forms can wreak havoc on a person's estate plan if they are not correctly filled out. Further, the majority of the time, it will not matter what a will says about these accounts. Therefore, it may be a good idea to consult with someone knowledgeable in estate planning to be sure that any account that will pass to heirs through a beneficiary designation is correctly filled out. Many District of Columbia residents also review these accounts periodically when the remainder of their estate plans are reviewed as well.

Source: finance.yahoo.com, "Man's mistake cost his children $400,000 of an IRA inheritance", Jeanie Ahn, June 27, 2014

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