Many people plan for their retirement. Individuals spend decades contributing to retirement accounts so they can have a comfortable retirement; however, few people consider what happens to their retirement accounts after they pass away.
Retirement accounts can have huge implications for your estate planning, so it’s important to sit down with an estate planning lawyer and take appropriate steps.
Naming A Beneficiary
It is incredibly important to name a beneficiary of your retirement account. If individuals do not take this step, the retirement account will have to go through probate, which can be a lengthy process and beneficiaries will be limited in how much they can withdraw from the account. In addition, retirement accounts that go through probate are subject to hefty taxes that keep more of your hard earned money from being distributed to your heirs. Individuals can also set up a trust to be the beneficiary of a retirement account. This can help prevent the retirement account from being subject to taxes, but it may not be the best options for everyone, so it’s important to discuss beneficiary designations with your estate planning lawyer before making any decisions.
Retirement accounts are subject to a number of complicated tax laws; but there are ways beneficiaries can limit the amount of taxes they are required to pay on retirement accounts. Beneficiaries may be able to take an income tax deduction for federal estate tax paid on retirement account withdrawals, which can help reduce the total amount of taxes paid on the account. Determining whether or not you are able to claim this deduction can be difficult without the help of an experienced attorney.
In addition to tax implications, beneficiaries are actually required to make withdrawals from the retirement account. The minimum amount that needs to be withdrawn varies based on the type of retirement account, and in some instances beneficiaries will need to withdraw the entire account within a certain timeframe.
Planning Is Crucial
The type of retirement account you own will determine exactly what steps need to be taken to best protect your assets after your passing. Hensley Krueger LLP can assess your assets and create a tailored plan to best protect retirement accounts after your death. Contact us today to schedule an appointment with one of our experienced estate planning attorneys.