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Understanding beneficiaries within estate planning

One of the most detrimental mistakes that a Pennsylvania resident can make is misunderstanding how beneficiary designations fit into an estate plan. There are a number of misconceptions that people hold in regard to their estate planning documents, but the power of naming a beneficiary is one of the most common areas of confusion. Failing to properly incorporate these documents into one's overall estate plan can yield disastrous consequences.

Many people believe that the provisions laid out within a will are the most durable aspects of their estate plan. This, however, is simply not true. The beneficiaries who are named on a given account will inherit the wealth held within that account, regardless of what is stated in one's will.

This means that a life insurance policy that names one's former husband as beneficiary will be paid out to that individual, even if the deceased clearly leaves everything to her current husband within her will. There will be virtually no avenue of legal recourse against that outcome. The same goes for any IRAs, employee stock options or deferred compensation agreements that name a beneficiary.

For those in Pennsylvania who are unsure of how their beneficiary information was listed, it is imperative to check with the administrator of the account and determine who is named as beneficiary. The process of changing that designation is simple, but this is an area in which procrastination is one's worst enemy. Each year, families are shocked to learn that they have been cut out of an intended inheritance due to a failure to update these important estate planning documents.

Source:, "Money Matters: The trump card of estate planning", Marc Hebert, May 21, 2015

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