Often, people fail to consider how to best handle their retirement accounts when crafting their estate plan. Retirement accounts, however, are typically one of the largest assets in a person’s estate. Therefore, this failure can often prove problematic for beneficiaries. A recent article encourages readers to properly plan for their retirement accounts.
Interestingly, many people forget to even name a beneficiary for their retirement, or update the beneficiary designation after experiencing a death or divorce. As wealth advisor Karen Altfest noted, “We’re always asking clients about these accounts and they look like deer in the headlights.” Recently, Altfest assisted a client who did not realize that she did not name a beneficiary for her retirement account worth a whopping $500,000.
It is especially important for high net worth spouses to revisit their beneficiary designations. This is because newly implemented federal law allows spouses to share their estate tax exemption through an estate-planning maneuver called portability. Therefore, spouses with a combined net worth of over $10 million may wish to consider naming a trust as the beneficiary of their retirement account, rather than a spouse, in order to avoid estate tax consequences. Without planning for their retirement accounts, a policy owner may create higher estate and income tax liability for their heirs.
