Check your Beneficiary Designation
One very important and often overlooked aspect
of estate and financial planning is the designation
of the beneficiaries of retirement plan benefits.
Upon your death, this non-probate asset will
pass by operation of law to your designated
beneficiary(ies) regardless of the terms of
your will or trust. The balance in your account
may be subject to federal and state estate taxes,
and the transfer may result in the acceleration
of federal and state income tax liabilities.
Thus, any planning for these benefits should
also include strategies for dealing with taxes
on death and post-death distributions.
For example, you should consider ways to minimize these taxes at the same time that you decide to whom and in what manner the benefits should be paid. Thus, all basic estate planning considerations must be dealt with. For example, the following questions should be answered:
- Who should receive the benefits
- Should they receive them outright or in trust?
- Should the benefits be payable over time or should the beneficiary(ies) have the right to accelerate the payments, even to the extent of taking a lump-sum?
In addressing these questions, it is important to correctly designate your primary and contingent beneficiaries. A proper designation will depend upon the overall intent and plan of disposition of your estate and the designation form should be prepared with the same degree of care as your will, power of attorney, or other documents.
Keeping your beneficiary designations up to date is extremely important, but unfortunately it’s an issue to which many individuals pay far too little attention. With any type of account (IRA, 401(k), insurance contract), beneficiary designations require special attention. Because circumstances continually change, we suggest that you contact your IRA custodians, insurance agent, and human resource officer periodically to review your beneficiary designations, just to make sure that you have properly designated who you want to receive these funds.
The articles and opinions
in this publication are for general information
only and are not intended to provide specific
advice or recommendations for any individual.
