Retirement Trusts

How Do I Include Retirement Accounts in Estate Planning?

You probably made beneficiary designations for your retirement accounts, when you opened them. Remember: who you designated can affect your overall estate planning objectives. Because of this, when including your retirement assets in your estate, ask yourself if anything has changed in your life since then that would affect their status as your beneficiaries, as well as how they’d receive the retirement assets.

Investopedia’s recent article, “Include Your Retirement Accounts in Your Estate,” gives us some things to consider in the New Year.

Beneficiary Designations. Review your beneficiary designations after major life changes. If you fail to make these designations, the funds will most likely go into your estate—a horrible outcome from a tax and planning perspective. If your estate is named a beneficiary, your heirs must wait until probate is finished to access your retirement accounts. It is usually better to name an individual or a retirement plan trust as your beneficiary.

Protecting Retirement Funds With a Trust. Another option is to include a retirement plan trust in your estate planning, instead of giving your retirement funds directly to named individuals. This allows you more control over the distribution while protecting your heirs from additional paperwork and taxes. Trust distributions keep a beneficiary from accessing and spending their inheritance all at once. It’s also a good idea if your beneficiaries include minor children who shouldn’t have direct access to the money until they are adults. Be sure to consult with an estate planning attorney, because there are tax and other complexities associated with designating a trust as beneficiary.

Required Minimum Distributions (RMDs). Your retirement plans have rules about when you are required to start taking distributions. For 401(k) accounts, you are required to start taking RMDs at age 70½. However, if you die and leave retirement plans and accounts to your heirs, these rules apply to them instead. A spousal beneficiary can roll over your retirement funds tax-free into their retirement plan and make their own distribution choices. However, other beneficiaries don’t have the same option. Tax treatment and distribution options vary, depending on who is receiving your retirement assets.

Tax Considerations. The biggest worry you need to address when designating retirement accounts as part of your estate plan, is how they’ll be taxed. Consider how to withdraw from these accounts while you’re alive and how to minimize tax consequences after you’ve passed.

Our estate planning attorneys have a strong understanding of retirement accounts and the tax and legal requirements of estate planning. By working with our attorneys, you can be certain your retirement assets are distributed to the proper beneficiaries with the least tax liability.


Reference: Investopedia (August 27, 2018) “Include Your Retirement Accounts in Your Estate”

How Do I Handle an Inherited IRA?

With an inherited IRA, in many cases, the parent is the original beneficiary and the children are the successor beneficiaries. Both the original owner and beneficiaries need to follow some strict rules.

nj.com’s recent article, “Inheriting an inherited IRA? Your payout choices will be limited,” explains that per IRS rules, if you die prior to withdrawing all the funds from an inherited IRA, then the beneficiaries are bound by the same Required Minimum Distribution (RMD) schedule that they’d chosen when they inherited it.

A person will typically choose either his own life expectancy or the life expectancy of the original plan participant, whichever’s longer. The successor beneficiaries must then keep withdrawing what’s left, according to that same schedule.

However, it’s different if you leave your own IRA to your children. In most circumstances, children who inherit an IRA would be able to withdraw the funds over their own life expectancies.

Note: this is the general rule. The IRA rules are quite complex, and there are many exceptions to the general rules. Ask the financial institution where the IRA is held, if they have any rules concerning their IRAs that may change the general rules.

With an inherited IRA, you need to take annual distributions no matter what age you are when you open the account. This doesn’t apply if you’ve simply transferred another IRA to your own IRA.

Again, as a general rule, you must take distributions during your lifetime or within five years after the original account holder passed away.

If you inherit a Traditional IRA, you’ll pay taxes on any distributions you take. Rollover, SEP, and SIMPLE IRAs become Inherited Traditional IRAs. In contrast, with an Inherited Roth IRA, you don’t pay taxes on distributions.

To evaluate the potential effect an inheritance might have on your overall tax situations, talk to our experienced estate planning attorneys.


Reference: nj.com (December 20, 2018) “Inheriting an inherited IRA? Your payout choices will be limited”

How Much Will It Hurt to Tap Retirement Savings?

“If you are looking to pull cash from your 401(k) plan or traditional IRA without getting hit with a penalty, the IRS will allow you to do it.”

This is a move of last resort. You’ll need to do all the research to be sure this will not do more damage to your retirement savings than absolutely necessary. You are allowed to take a series of equal payments from your IRA or a 401(k) account, without being subject to a 10% penalty—but only under certain circumstances, advises CNBC in the article “How to tap your retirement savings without getting hit with a stiff penalty—but only if you absolutely have to.”

Make the Most of Your Retirement Savings Potential

“Everyone wants to retire with ample savings in their bank account. Plan your retirement, by avoiding these eight common IRA mistakes.”

IRAs, or Individual Retirement Accounts, are great tools for retirement savings. The best tactic says Born2Invest in the article “Retirement planning: 8 common IRA mistakes” is to make the most of your IRA, as early in your career as possible. That will give you a larger nest egg later in life.

Avoid these classic errors and keep that IRA growing! …

BIG Retirement Mistakes You Might Make

time“Though retirement can be a fulfilling time in people’s lives, it can also be a stressful one. This especially holds true, if you fall victim to the following mistakes, so be sure to avoid them at all costs.”

Most people spend their entire working lives dreaming of retirement. However, when they get there, it’s a new and strange world without fixed schedules or routines. If you make any of these mistakes, reports The Motley Fool in the article “4 Retirement Planning Mistakes You Probably Don’t Even Realize You’re Making,” you might be surprised to find yourself working again! …

A Completely Different View of 401(k)s and Retirement Savings

“A 401(k) plan ensures that you have money to spend during your retirement years. However, there are reasons why a 401(k) stinks.”

It’s almost always enlightening to hear from a different perspective, even in finance. This article from Born2Invest, “Retirement planning: The downsides of your 401(k),” takes a somewhat contrarian view of retirement accounts in general and the use of 401(k)s in particular. We may not agree. However, it’s worth the read. …

Making Social Security Work with Your Retirement Accounts

“Most Americans enter retirement age with access to Social Security benefits. Many people also have Individual Retirement Accounts, including those that were funded by transferring money from workplace 401(k) plans.”

One trick to a successful retirement is to make your Social Security benefits coordinate optimally with your Individual Retirement Accounts (IRAs), says AZ Central in the article “Retirement planning: Connecting the dots between Social Security and IRAs.”

Not everyone takes a step back to think this way.  However, it is a smart thing to do. With proper planning, your retirement could lead to better results for your investments and a better decision on when to take Social Security benefits. …

What are the Key Risks in Retirement Planning?

Retirement planning is not easy for couples or individuals, or the people who counsel them, according to a recent article in Wicked Local (Topsfield) titled “Your Financial Views: How your retirement can be the ‘golden years’.”

A conference on planning discussed a Harvard Business Review study called “The Crisis in Retirement Planning” that challenged how consumers and the financial industry look at retirement. The author said that the process is broken, which is why many families are not enjoying their “golden years.” The article presents five key risks and some solutions. …

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