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Designating beneficiaries and estate planning commonly linked

On Behalf of | Oct 7, 2019 | estate planning |

Maryland residents will undoubtedly understand that it can be a wise decision to craft an estate plan that addresses their needs. Whether that means a will, a trust, a power of attorney or other devices that can be used when estate planning, the document can provide security and peace of mind. Still, there are concerns that should be considered. One is understanding the importance of naming beneficiaries — also referred to as beneficiary designations — for retirement accounts, life insurance, bank accounts and more.

People might make mistakes when they are unaware of the common links between an estate plan and a beneficiary designation. Therefore, it is wise to be prepared. First, cash gifts are a common part of an estate plan. If that is the case, the testator should ensure that there is a sufficient amount for it to be paid as desired.

Many people will select devices, like a trust to save on the estate tax. It is imperative for there to be enough assets to go into the trust so the savings are maximized. This can be sabotaged if individuals are named as beneficiaries and the trust is not. People may make the mistake of not being as clear as they should be when they try to change the beneficiary. The form must be filled out correctly with all the necessary information. Some might want to name a spouse as the beneficiary on an account or policy with the trust second.

Often, people want to make a change at the last moment due to nervousness and concern with assets going into the trust. If there is a serious illness and the testator’s spouse is thinking about there being enough in the trust to pay everyday expenses, the testator could be asked to make changes to the beneficiaries. That could cause tax problems and legal disputes. Finally, qualified accounts, such as an IRA have certain provisions for taxes that will require legal advice to navigate and determine the best alternative. Regardless of the goals in an estate plan, it is essential to have a full understanding of various issues that frequently arise.

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