401(k) Accounts And Your Estate Plan
Professional financial planners and the personal finance charlatans of the Internet will try to persuade you of all kinds of glamorous ways to invest your money, but like so many other unsung but consistently employed chumps, you know that boring is best. You can’t go wrong with a 401(k) account where you signed up to make a monthly, employer-matched contribution when you started your job. Therefore, you have been contributing to your retirement savings every pay period, before your paycheck even gets deposited in your account; your retirement savings has been growing consistently, with little effort on your part. In other words, the mere existence of your 401(k) account is a boon to your estate plan. Not only does it increase your retirement income, but it frees up funds for other hallmarks of a financially secure retirement, like long-term care insurance and paying off your home mortgage. As with so many aspects of estate planning, there are ways to deal with your 401(k) account to derive the greatest financial benefit for you and your heirs. To find out more about getting the most wealth from your 401(k) account with the least hassle, contact an Orlando estate planning lawyer.
How to Keep Your 401(k) Account Out of Probate
A 401(k) account in its natural state is a probate asset; it becomes part of your estate when you die. The money in it becomes part of the money in your estate, and when your estate settles, the probate court distributes it in percentages, according to your will or, if you do not have a will, according to the laws of intestate succession.
It is faster and easier to inherit property that does not have to go through probate, so strategies for keeping assets out of probate are a major part of estate planning. In this regard, there is an easy fix for 401(k) accounts. You can transfer your 401(k) account outside of probate by designating a beneficiary on the account.
If You Designate Your Spouse as the Beneficiary of Your 401(k) Account
The beneficiary of the account can claim it by presenting the original owner’s death certificate to the financial institution that administers the account. If you designate your spouse as the beneficiary, your spouse has three choices. Your spouse can withdraw the money in a lump sum or installments, keep the money in the 401(k) account indefinitely, or merge it with your spouse’s own 401(k) account.
If the Beneficiary of Your 401(k) Account Is Someone Other Than Your Spouse
You can choose anyone to be the beneficiary of your 401(k) account, but non-spouse beneficiaries have fewer options. If the beneficiary is not your spouse, his or her only choice is to withdraw the money within ten years of your death. Since 401(k) withdrawals for beneficiaries are taxable income, the beneficiary will consider taxes when determining the schedule for withdrawing the money.
Contact Gierach and Gierach About Employer-Provided Retirement Accounts and Estate Planning
An estate planning lawyer can help you build a solid estate plan if you have an employer-provided 401(k) account. Contact Gierach and Gierach, P.A. in Orlando, Florida to discuss your case.
Source:
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