estate planning lawyer

When it comes to estate planning, people often focus on assets such as real estate, investments and personal belongings. However, retirement accounts like 401(k)s and IRAs are valuable assets that also deserve careful attention in your strategy, with the goal of protecting them from dissipation by taxes and making sure they are distributed according to your intentions.

These are among the most important considerations for transferring retirement accounts upon death:

  • Designating beneficiaries — A crucial step in estate planning for retirement accounts is to specify who will inherit these assets after your passing. Be sure to keep your beneficiary designations up to date, especially after significant life events like marriage, divorce or the birth of a child. Failing to designate beneficiaries or to keep them current could result in the funds going into your estate and being distributed contrary to your wishes.
  • Avoiding probate  One of the primary reasons to include retirement accounts and pension funds in your estate plan is to avoid probate, a legal process that can be lengthy, expensive and cumbersome. Retirement accounts do not pass under your will. These assets pass directly to your chosen beneficiaries, which means they do not go through the probate process. This ensures a faster and more private transfer of wealth to your loved ones.
  • Avoiding taxes and penalties  Retirement accounts come with tax advantages, but they also have specific rules and regulations that can lead to taxes and penalties if not handled correctly in your estate plan. Strategies such as Roth IRA conversions, required minimum distribution (RMD) planning and establishing an irrevocable life insurance trust can help you pass on your retirement savings while minimizing the impact of estate taxes.

It's also important to be aware of federal rules regarding inherited IRAs. The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2020 introduced changes to inherited IRAs that may affect your estate plan. Understanding these changes and adjusting your plan accordingly is important to avoiding unexpected tax consequences.

To maximize the benefits of retirement accounts and minimize tax liabilities, it is advisable to work with an experienced estate planning attorney who can help you navigate the complexities. Your overall goal should be to ensure a smooth transfer of wealth to your loved ones and protect your hard-earned savings.

If you need assistance with estate planning or have questions about how to manage retirement accounts as part of your plan, the attorneys at Favaro, Lavezzo, Gill, Caretti & Heppell, PC are here to help. We serve clients in Solano, Contra Costa and Napa counties, California. To schedule a consultation, please call us at 707-674-6057 or contact us online.