As we head further into summer, many of us are heading on vacations. Some may be thinking of a more permanent vacation: retirement! This month, we’ll be discussing the important estate planning concepts you should know when it comes to retirement and qualified retirement plans, from powerful ways to plan for children and grandchildren to ways to incorporate creditor protection or how to most effectively plan for your retirement accounts.
In our experience, we’ve seen that while there are additional rules when it comes to planning for retirement assets, they also provide tremendous generational planning opportunities. With proper planning, you can take advantage of generational planning and pass wealth down to loved ones over decades. We’ll look at some of the important estate planning considerations when implementing this type of planning, as specific techniques must be used to avoid undue tax consequences.
When it comes to qualified retirement accounts, it’s often the financial institutions that become the most complicating factor. Each institution has its own idiosyncrasies, but all will probably require their own specific beneficiary designation forms. Because these accounts are a type of contract, the beneficiary designation form is what will determine what happens to that account after you pass, regardless of what you state in a will or trust. If not properly aligned with your estate plan, you can create undue tax consequences for heirs and possibly expose the inherited assets to creditors, bankruptcies or division in a divorce.
Unlike most other assets, qualified retirement assets cannot be owned by a trust during the owner’s lifetime without triggering devastating income tax consequences. While qualified retirement assets cannot be transferred into a revocable trust during your life for tax reasons, you can name a trust as a beneficiary after your death to provide creditor protection and continue to get income tax deferral.
This can be a complicated and technical area of estate planning, but this month we’ll distill the important factors so you can effectively plan for your family. Remember to work with an experienced estate planning attorney when dealing with planning for retirement assets. If possible, work with an attorney with an ongoing client care program so you and your team of professionals—CPAs, financial advisors and your estate planning attorney—can address any changes in your assets, family situation or the law and ensure your estate plan will take care of your family the way you intend.
For more information on the importance of aligning assets with your estate plan, explore our website and contact us to schedule your consultation today!