IRA & Retirement Planning

Retirement Plans and Estate Planning

At first glance, the concept of Individual Retirement Accounts (IRAs), 401(k)’s, and other retirement plans seems simple enough: A structured way to save for your golden years while deferring taxes on your growing nest egg. Unfortunately, that simple concept is one of the most complex areas of estate planning once IRS rules are applied.

Maximizing the Value of Your Retirement Assets

To ensure you are protected, an estate planning attorney must interpret complicated income tax rules and IRS regulations while considering tax reduction techniques as they apply to your individual situation. There may be double (or even triple) taxation of retirement plan assets when these assets are transferred to future generations (i.e., income tax, estate tax, and possibly even what is called a “Generation Skipping Tax”.) Proper planning may reduce or even eliminate two or three of these taxes. With a properly designed plan the income tax may be spread out over the lifetime of the beneficiaries while the remaining funds continue to grow tax free throughout the lifetime of each beneficiary. Fortunately, our attorneys immerse themselves daily in the questions and concerns IRA investors face when creating an estate plan.

Steps to Begin Planning

Your first step in planning must be to decide who is intended to benefit from your estate plan, which includes your IRA as well as other retirement assets. Each choice will have tax consequences to consider. When you begin, consider these steps as you plan for the best use of your retirement plan assets:

  1. Survey your assets: investments, savings, retirement plans, real estate, life insurance, annuities, business interests, and other personal assets.

  2. Designate your beneficiaries: IRAs, 401(k)’s, annuities, life insurance policies, etc. as these assets do not pass in accordance with your Will or Living Trust.

  3. Estimate what you will need: to ensure financial security during your lifetime.

  4. Define your goals: such as, providing for your spouse, children, grandchildren, charitable donations, etc.

  5. Get professional advice: from an estate planning attorney, financial advisor and CPA.

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