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Beneficiary designations: updating important

In recent years, Congressional action on esate taxes has focused on raising the exemption amount. The changes have increased the amount of assets that can be excluded from the federal estate tax. Individuals can now pass along up to $5.25 million without tax liability. For married couples, the amount is a hefty $10.5 million.

This does not mean, howevever, that only very wealthy taxpayers have to be concerned about the estate planning issues. In Massachusetts and across the country, many other people - of varrying income levels - also have important estate planning decisions to make.

For example, making thoughful decisions about beneficiary designations is important for many different types of taxpayers. These designations are required on life insurance forms, as well as on retirement accounts.

At the time someone buys an insurance policy or opens up a retirement account, decisions about beneficiaries may seem easy. If someone is married and has no children, designating the spouse is the obvious choice.

But it is easy to neglect to update these designations as life events occur. A child may be born. A couple may get divorce. There may even be a remarried after a divorce.

Events like this should trigger a review of beneficiary designations. The purpose of the reviw is to make sure the designations reflect the policy or account holder's current life situation and estate planning goals.

If this step is omitted, it is possible that long-forgotten designations could even undercut a validly executed will.

Please visit our page on estate and tax planning.

Source: "Estate Planning Remains a Moving Target Under New Tax Law," The New York Times, Paul Sullivan, 4-26-13

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