Without the right preparation, planning for retirement assets can become much more complicated than you may imagine. Perhaps you see retirement as the chance to reap the benefits of your life’s accomplishments, but if you have specific wishes about how your retirement assets will be handled after your death, it’s important to be aware of some of the issues you will likely face. The truth is that there is no single universal template for planning retirement assets. Options and requirements will vary case by case, based on a variety of different factors. Without the right guidance, the process can get overwhelming fast.
To begin with, there’s the issue of Required Minimum Distributions (RMDs). Money in retirement accounts is usually tax-deferred: the funds only become subject to taxation when they are distributed. If you’re worried the effects of taxes on your estate, you may think this is good news. Just keep the money in your retirement accounts, enjoy tax-free interest, and defer distribution until the last possible minute to save on taxes, right?
Wrong. As of this year, the government has implemented regulations calling for regular RMDs for seniors above 70 1/2 years old. Consequently, you can no longer indefinitely leave your retirement assets safe within the tax-free haven of an IRA or 401(k); you must make regular distributions to your beneficiaries in accordance with the law. This policy has arisen as part of the government’s ongoing effort to find new sources of revenue in the aftermath of the Great Recession of 2008. The required amount and timing for each RMD will vary from one individual to another, based on one’s age, the value of the retirement assets to be inherited, as well as the beneficiaries’ own circumstances.
Even with all that in mind, lots of other thorny issues can crop up. What should you do if the intended beneficiary is a special needs child, a minor, or somebody who can’t manage his or her own affairs due to alcohol, drug, or gambling addiction? Then there’s the question of whether retirement assets should pass directly to a beneficiary, or to a Trust. If you designate a Trust as beneficiary, what happens if the Trustor dies or becomes incapacitated?
No matter what the circumstances may be, one fact holds true: planning your retirement assets is a deeply-involved process that can sometimes require several different calculations and that can involve wide array of variables. For these reasons, you should seek the advice of an experienced estate planning attorney who is familiar with the intricacies of retirement asset planning.
Our firm focuses on estate planning, including planning for those with sizable retirement assets. As a member of the American Academy of Estate Planning Attorneys, the Zimmer Law Firm stays up to date with the ever-evolving regulations for retirement assets, developments in income and estate tax laws.
To learn more, you can visit our website, or call our office at (513)721-1513.