Make sure you think about potential disruptions and plan ahead of time

Families inherit money and sometimes make the right moves investing and spending. Inheritances can also ignite disruption, divorce, and a host of bad behavior – far from the hopes and plans of the benefactor.

What happens when you leave what’s probably one of your biggest investments: your individual retirement plan?

Your Retirement Assets

Perhaps most important, your estate plan must address potential disruptions: the U.S. tax code will almost certainly change, your heirs will experience life’s normal challenges and opportunities and something you never considered may befall those you leave behind. Early death, disability and divorce all happen every day.

You should probably leave your retirement assets to an individual. Such accounts include your:

IRA or 401(k)403(b) if you worked for a school or tax-exempt organization, a simplified employee pension (SEP-IRA), or any of a number of other plans. The retirement plans must go to your spouse unless he or she signed away control of them after you married (prenuptial agreements do not apply here), permitting you to designate a different beneficiary. You can leave your IRA to any person you choose.

Planning Ahead of Time is Key

What if you leave your retirement money to your estate instead of to a person? What if your beneficiary dies before you?

In either case, your savings must be liquidated and distributed over the next five years. You also lose the ability to arrange stretched payouts over individuals’ life expectancies – usually lowering future income taxes significantly. Plus it creates a potential marital asset for many recipients, newfound wealth that can evaporate in the wake of some future family tragedy or feud.

You can use specialized trusts to help mitigate most risks, such as the danger of a family beneficiary blowing the inheritance. A number of vehicles exist for restricting a beneficiary’s (irresponsible) access to the money. For example:

  • An incentive trust that pays out only if the beneficiary meets certain conditions and goals
  • A spendthrift trust also allows for monthly allowances or periodic payments for either the life of the beneficiary or until the funds are gone

You worked hard to save for your golden years. When the inevitable day comes and you no longer need what money remains, make sure you leave it behind the best way.

Leaving an inheritance to your loved ones is a significant act that can provide financial security for them in the future. However, it’s important to remember that there are potential disruptions that could occur and affect how your beneficiaries receive what you want them to have. That’s why estate planning should be considered an important part of your overall retirement planning. By taking the time to plan ahead, you can help ensure that your wishes are carried out as smoothly as possible, no matter what life throws at your family.

Have you started thinking about what kind of inheritance you would like to leave behind? If not, now is the time to get your Custom Retirement Paycheck Plan.

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Together, we’ll create a plan that is designed so your hard-earned assets go to your beneficiaries in the most tax-efficient manner. Let us show you in black and white a custom retirement income plan that is comprehensive, individualized and based on strategies that balance growth with downside protection. Get your Custom Retirement Paycheck Plan now!

Give us a call at our Charlotte office at (704) 248-8549, or our Clemmons office at (336) 391-3409. Or, click here to request a no-cost, no-obligation meeting.

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