Retirement Account Planning

Most taxpayers are aware that if their estate value is over a certain threshold, the government imposes an estate tax. However, many taxpayers do not realize that irrespective of the value of their estate, any balance remaining in their retirement account will be subjected to income taxation when it is distributed to their designated beneficiary. Planning to postpone the taxation on retirement accounts can be as important as your estate planning.

Retirement plans can refer to an IRA, 401(k) and many other vehicles. Married plan participants almost always want to name their surviving spouse as the beneficiary of their retirement plan. Surviving spouses, and only surviving spouses, have the ability to transfer a deceased spouse’s retirement account to an IRA rollover and continue the tax deferral until the surviving spouse attains the age of 70 1/2. For taxpayers with Revocable Living Trusts, naming the Trust instead of the surviving spouse directly, will result in the surviving spouse losing the ability to defer the income taxes until he or she is 70 1/2.

When designating your children as the primary or contingent beneficiary, care has to be used to allow the children to stretch out receipt of the funds in order to postpone taxation as long as possible. Contact us at 888-714-1738 or email us for any questions.