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Using Retirement Benefits in Your Estate Plan

By Allison E. Evans, Esq.

Most individuals today understand the critical importance of saving for retirement. We were lectured about it by our parents, we stress it to our children, and we discuss it with our employers and financial advisors. Fewer individuals, however, understand the extremely complicated rules and regulations which govern their retirement assets. Just as there are many different types of retirement plans, there are many significant variations in the rules that apply to them. As an unfortunate result, retirement assets are often mishandled, particularly in the context of an estate plan.

The good news? You do not need to become a self-taught expert on this intricate, vast subject in order to ensure that your retirement assets are being maximized and properly employed in your overall estate plan. Arming yourself with certain basic and accurate information to share with a professional advisor is the first key step to proper planning for retirement assets.

Obviously, it important to know the specific type or types of retirement plans in which an individual is participating. For example, the differences in tax treatment for a Roth IRA and a traditional IRA are significant.

In addition to a current estimate of your retirement assets’ value, know the proportion of employee and employer contributions that apply to your retirement plan. Whether contributions were partially made post-income tax, as opposed to pre-income tax, is relevant. Many individuals have rollover benefits from a previous plan, and these participants should learn what portion of their current balance is attributable to the rollover. Whether any withdrawals have been made from your retirement plan is another factor to be considered. For post-death considerations, be familiar with any effective beneficiary designations and, if applicable, related issues, such as spousal waivers. All of this information is likely contained in documents that can be provided by an employer.

If possible, obtain a copy of your retirement plan. Upon request, many employers will provide actual copies of a plan to its employees. Employers are required to at least provide participating employees with “Summary Plan Descriptions”, a condensed version which will summarize the retirement plan. Summary Plan Descriptions are only updated periodically, so if a full copy cannot be obtained, determine when the last update occurred and whether all recent changes are being reflected. For post-death considerations, be familiar with any effective beneficiary designations and, if applicable, related issues, such as spousal waivers.

Having correct and basic information about your retirement assets is the first, and most important, step to proper planning for retirement assets. After consulting with a financial advisor or estate planner, consistently review and monitor your retirement planning assets with them. Retirement assets are the single most valuable asset in an increasing number of estates. In today’s turbulent economy, it is critical to arm yourself and your advisors with complete and accurate information to maximize retirement assets, both for yourself and for your heirs.

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