This week’s post on Retirement Plans is the fourth and final part in our back-to-school series, focusing on estate planning for minor children. To read week one’s post on Guardianship, please click here. For week two’s post on Asset Management, please click here. For week three’s post on Life Insurance, please click here
Retirement accounts are a great way to plan for your family’s future. However, a common mistake many of us make is not coordinating our retirement accounts with our estate plan. The reality is that you need to have correct beneficiary designations recorded in order to achieve your goals for distribution of retirement assets. That way, if something happens to you your family can continue to reap the benefits of your hard work.
If there is no beneficiary designation recorded with your retirement plan administrator, the account will need to go through the probate process prior to becoming available to your beneficiaries. By naming beneficiaries on these accounts, you make it possible for the funds to go directly to those people, thus avoiding probate. Something to keep in mind, however, is that retirement accounts with named beneficiaries will not be distributed according to your broader estate plan, rather they will go directly to the person(s) named on the account. One way to both avoid probate and coordinate your retirement accounts with your estate plan is to name your trust as the primary beneficiary. The trust will then distribute the account according to the rules you have set up.
Here are the TOP FIVE tips to keep in mind when naming beneficiaries for your retirement plans:
- Beneficiaries are designated by filling out a beneficiary designation form with your account administrator.
- A beneficiary does not need to be specifically named. All you need to do is make sure that your beneficiary can be identified (e.g., name “all of my surviving children”).
- You can name anyone as the beneficiary of an IRA.
- For workplace plans like 401Ks, you need to get a spouse’s written permission to leave it to anyone other than the spouse.
- Many retirement accounts can not be owned by trusts during your life, but can be left to a trust after death for streamlined administration.
You can learn more about how best to plan for your family by contacting us to schedule a Family Wealth Planning Session, where we can identify the best strategies for you and your family. This month we have a special offer: Be one of the first FIVE to schedule a Family Wealth Planning Session in September and we’ll waive our regular $750 planning session fee.
