How Retirement Assets Factor Into Your Estate Plan

How Retirement Assets Factor Into Your Estate Plan

In the world of estate planning, coordinating retirement assets is crucial. These days, a substantial portion of a person’s overall wealth can be found in tax-deferred retirement accounts like traditional individual retirement accounts (IRAs), 401(k) plans and 403(b) plans.

There are many factors to take into account when considering the role your retirement assets play in your estate plan. Keep in mind that inherited property is not usually subject to income tax, but that’s not the case with retirement accounts. This is because the money in most retirement account has not previously been subject to income tax.

After the taxpayer’s death, the person’s beneficiaries typically need to pay income tax on the amount withdrawn from the retirement account, so the primary goal is to provide the opportunity for the beneficiaries to postpone withdrawals from the account and defer the income tax as much as possible.

If the taxpayer’s spouse is the beneficiary, that individual has the option of rolling over the retirement account into a personal IRA. This allows the spouse to defer withdrawals until reaching the age of 70 1/2. If a beneficiary is not a spouse, that person must begin taking withdrawals from the account the year after the taxpayer’s death.

The rules regarding multiple beneficiaries and naming trusts as beneficiaries venture into more complicated territories and require the guidance of a qualified estate planning attorney. If you are ready to begin your estate planning process to ensure your family’s future is secure, contact a Tampa-area lawyer today to get the process started.