Retirement Planning and Your Estate Plan | Oklahoma Estate Planning Attorneys (2024)

FAQs

How are retirement plans handled in an estate plan? ›

Retirement assets generally transfer directly to properly designated beneficiaries without passing through probate.

So, to clear up the confusion, estate planning has to do with your business interests and how those interests contribute to your estate's value, while succession planning has to do with creating an official document that outlines how your business will run and who will take over once you're gone or incapable of ...

Besides making sure your assets get to the people you choose, planning can help minimize income, gift and estate taxes, too. Without an estate plan, and specifically a will, the laws in your state will determine what happens to your possessions, and the courts will decide who gets custody of your children.

While the goal of a financial planner is to help you accumulate wealth, the goal of an estate planning attorney is to utilize various estate planning tools to help you preserve and distribute your wealth after your death.

When a participant in a retirement plan dies, benefits the participant would have been entitled to are usually paid to the participant's designated beneficiary in a form provided by the terms of the plan (lump-sum distribution or an annuity).

Retirement accounts and beneficiary designations

Retirement accounts, such as 401(k)s and IRAs, allow account holders to designate beneficiaries to inherit the funds upon the account holder's passing. The account typically bypasses probate, providing a more streamlined transfer of assets.

Effective corporate succession planning increases the availability of capable individuals who are prepared to assume such roles as they become readily available. Leadership roles can easily be filled as senior executives retire or if senior management positions are vacated due to the resignation of key officers.

For long-term succession planning to be successful, business leaders must recognize, train, and nurture high performers over time to set them and the organization up for success. That way, when the opportunity arises to take on a key role, that individual is well prepared to assume their new responsibilities.

A key advantage of an estate plan is its power to minimize the probate process and its expenses, delays, and loss of privacy. Charitable giving and business succession can be incorporated into an estate plan.

4 big retirement risks — and how to prepare for them. Overspending, investing too conservatively and veering away from your plan — these are some of the most common traps you can fall into on the way to retirement.

What is one of the biggest mistakes people make about retirement planning? ›

According to professionals, the most common retirement planning mistakes are time-related, like outliving savings or not understanding how inflation can affect a portfolio over time.

For many people, it's not just about the money. There are other key factors to consider in addition to finances, including lifestyle, family, health, and community involvement.

Fiduciaries are obligated to act in your best interest, whereas the title “financial advisor” implies no legal obligation. When looking for a financial advisor to help you develop your custom financial plan, you should ensure that your financial advisor is a fiduciary.

A financial planner generally takes a more comprehensive, long-term approach to money management. While they often hold the same licenses and carry out the same functions as financial advisors, financial planners tend to focus on creating personalized and holistic plans for clients.

A financial advisor is worth paying for if they provide help you need, whether because you don't have the time or financial acumen or you simply don't want to deal with your finances. An advisor may be especially valuable if you have complicated finances that would benefit from professional help.

Can creditors go after my 401(k) when I die? Creditors cannot go after your 401(k) when you die. Your executor will settle debts out of your estate but not your 401(k) unless you didn't name any beneficiaries. In that case the 401(k) becomes part of your estate, which pays any outstanding bills.

If an estate is the beneficiary of your IRA, it means that the IRA will distribute the IRA assets to the estate, and the estate will share out the IRA funds with the heirs of the estate based on the terms of the IRA owner's will.

Retirement Accounts May Be Subject to Estate Tax at Death

The federal estate tax is currently 40%. California does not currently impose a state estate tax, but many other states do impose state estate and inheritance taxes.

Beneficiaries of retirement plan and IRA accounts after the death of the account owner are subject to required minimum distribution (RMD) rules. A beneficiary is generally any person or entity the account owner chooses to receive the benefits of a retirement account or an IRA after they die.