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Choosing Retirement Account Beneficiaries

Posted by Brad Sarkauskas | Aug 27, 2018 | 0 Comments

Throughout the years you may have built up a significant financial portfolio to protect your financial well-being. This includes things like investment accounts, real estate, and life insurance. But what happens to these things when you're gone?

 Making a plan for your loved ones after you pass is a crucial step to protect them. Retirement plans are another important asset to consider when you're forming your strategy for when you're gone. Like some other assets, it may make sense to name a beneficiary following your death. Additionally, retirement accounts can sometimes have steep tax implications, so be sure to choose your beneficiaries wisely.

 Here are some of the general rules and concerns when you're deciding who to name as your retirement account beneficiary.

Consider Naming Your Spouse

Surviving spouses can typically roll the deceased's retirement account into their own plan. Doing so means that, until they reach the age of 70, they can defer withdrawals and take minimum distributions.

 However, naming your spouse may not always be the best option. Consider your spouse's abilities and the tax implications your retirement plan might have. You should also think about whether your children need the money more than your spouse will, or if you are in a situation where you want your family from a previous marriage to receive the funds.

Use a Trust

In the case that you do not want to name your spouse, consider naming a properly drafted trust as a beneficiary. A trust can provide management for those in special circumstances and benefit those you designate.

 Note that not all trusts are properly drafted to efficiently receive retirement funds. In these instances, beneficiaries may have to liquidate the account within five years rather than stretch out the distribution. This can cause significant taxation and won't provide for the beneficiary as well as it should.

Be Wary of Charities

Naming charities as beneficiaries may provide some tax benefits in the short-term, but doing so brings its own array of complications. If a charity is named as a partial beneficiary, be sure to evaluate the ability of other beneficiaries of the account or trust to stretch the distributions throughout their lifetimes. You may want to consider designating separate retirement accounts to separate beneficiaries to avoid problems that may arise.

Keep Copies of your Designated Beneficiary Forms

As with all important life documents, you should always keep copies of your designated beneficiary forms in a secure location. Don't rely on retirement plan administrators to keep track of your documents. Give copies to your estate lawyer to make sure your beneficiaries are properly taken care of after you're gone.

 Naming beneficiaries may seem overwhelming, but it is a crucial step to securing a plan for your loved one's future. To ensure your assets are properly distributed and your affairs are in order in a timely manner, contact an estate planning lawyer today.

 You shouldn't wait. Make sure that your family has everything it needs to properly maintain their lives in the future. Contact Heritage Law Office to speak with a reputable estate planning attorney today. We strive to make your planning process as smoothly as possible and handle your assets with the greatest care. Talk to us today at (414) 253-8500 to receive a free case evaluation.

Bradley J. Sarkauskas, Attorney-at-Law

About the Author

Brad Sarkauskas

As the founding member of the Heritage Law Office of Wisconsin, LLC, attorney Brad Sarkauskas is equipped with the tools--through his extensive background in finance--to effectively represent his clients legal economic interests. With over 20 years of experience in finance, insurance, and taxati...


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