Planning for the future involves more than just drafting a will or setting up a trust. Your retirement accounts—like 401(k)s, IRAs, and pensions—play a critical role in how your assets are passed on to loved ones. Making sure these accounts are reviewed and properly integrated into your estate plan can help minimize confusion, reduce taxes, and ensure your wishes are carried out clearly.
Don’t wait to align your retirement accounts with your estate plan — contact us through our online contact form or call (972) 945-1610 to get started.
Why Retirement Accounts Deserve Special Attention
Retirement accounts often make up a significant portion of a person’s wealth. Unlike other assets, they are typically passed on through beneficiary designations rather than a will. If these designations are outdated or incomplete, the funds may not go where you intended. Regular reviews ensure your beneficiaries are current and your broader estate goals remain intact.
Understanding Beneficiary Designations
When you opened your retirement accounts, you likely named primary and possibly contingent beneficiaries. These designations override instructions in your will, so even if your estate plan is up to date, outdated beneficiary information can create complications. For example, if a former spouse is still listed, that person may receive the funds regardless of your current wishes. Keeping these designations current is essential for an estate plan to function as intended.
Tax Implications To Consider
Retirement accounts have unique tax rules. In many cases, distributions to beneficiaries may be taxable. The SECURE Act changed how inherited retirement accounts are treated, requiring most non-spouse beneficiaries to withdraw the full balance within 10 years. This can affect how much your loved ones actually receive. Reviewing these tax implications with a trusted professional can help you structure your estate plan to minimize the burden on your beneficiaries.
Coordinating Retirement Accounts With Your Estate Plan
A well-structured estate plan ensures your retirement accounts work in harmony with other assets. Coordination is particularly important if your estate includes trusts, real property, or business interests. Here are some common steps people take when reviewing their retirement accounts:
- Confirm primary and contingent beneficiary designations are accurate and reflect current wishes.
- Assess whether a trust should be named as a beneficiary for greater control over distributions.
- Review required minimum distribution (RMD) rules and how they align with your estate planning goals.
- Evaluate tax strategies that may reduce the burden on heirs.
Taking the time to align these elements can prevent disputes, delays, and unintended tax consequences.
Common Mistakes To Avoid
Even small oversights with retirement accounts can create major problems later. Consider these frequent issues:
- Failing to update beneficiaries after life events like marriage, divorce, or the birth of a child.
- Naming the estate instead of individuals or trusts, which can complicate tax treatment.
- Overlooking contingent beneficiaries, leading to unnecessary probate.
- Forgetting to review account details after legislative changes affecting retirement distributions.
Avoiding these mistakes ensures your retirement savings serve their intended purpose in your estate plan.
When To Review Your Retirement Accounts
It’s wise to review retirement accounts regularly and during major life changes. Consider revisiting your designations and strategy:
- After significant life events (marriage, divorce, birth, or death in the family)
- Following updates to tax laws or estate planning regulations
- When changing financial institutions or rolling over accounts
- Every few years as part of a broader estate plan review
Regular updates keep your estate plan aligned with your goals and legal requirements.
Working With A Plano Estate Planning Attorney
Estate planning involves careful coordination of legal, financial, and tax considerations. Consulting with a Plano estate planning attorney can help ensure every part of your plan—including retirement accounts—works together seamlessly. Professional guidance can provide clarity, reduce the risk of errors, and help your loved ones avoid unnecessary complications in the future.
Contact A Plano Estate Planning Attorney Through Crain & Wooley
Making sure your retirement accounts fit smoothly into your estate plan is a crucial part of planning for the future. To learn how a Plano estate planning attorney can assist with reviewing and updating your estate plan, reach out through our online contact form or call (972) 945-1610. The team at Crain & Wooley can help you create a thoughtful plan that reflects your wishes and protects your loved ones.