Planning for Retirement Assets in Your Estate Plan

Blog: Whether you are already retired or are thinking about it, establishing a plan to coordinate both anticipated retirement goals and a plan for legacy assets is critical. Depending on their intended purpose, your assets may need to be managed distinctly differently to allow for a cohesive, successful outcome.

Where to Begin? When developing (or making changes to) your estate plan for retirement assets, it’s important to first identify your goals: Do you want to leave the bulk of your assets to your kids? Do you have big plans to support charitable causes with your estate? To achieve your goals in the best way possible, you’ll need to get familiar with how your assets will flow, both for retirement and then to your heirs.

Having your accounts titled and earmarked to pass appropriately may enable an efficient tax result, securing a successful retirement and transfer to the ultimate recipients. You can avert problems by checking beneficiary designations, titling, and other legal documents, to align your assets according to your plans. Finally, adjust your plan when your intentions, beneficiaries’ circumstances, and tax rules change to optimize your results.

Plan for Both Core Assets and Excess Capital. If you’re retired or getting ready to retire, you’ll be advised to review your investments and income. Stable sources of income, such as pensions, annuities and Social Security may be supplemented by distributions from taxable investments. Required minimum distributions from tax-deferred traditional IRAs and other qualified plans beginning at age 72 (for those turning age 70½ in 2020 and thereafter) may also be part of the mix. Your core capital should include resources necessary to cover anticipated annual expenses, along with sufficient reserves to address unanticipated medical, long-term care or other episodic expenses. Those with surplus retirement assets should also consider planning for excess capital intended for their estate’s heirs.

Optimize Legacy Planning for Retirement Assets. Once you’ve identified the core capital you need to fund your day-to-day expenses, it may be advantageous to segregate the excess capital reserved for wealth transfer. If not earmarked, excess capital may not be managed effectively for tax or investment purposes over the long term.

Establish a Plan for Your Taxable Assets. It may be surprising to know that children or other individuals can be better off inheriting highly appreciated taxable investment accounts rather than a traditional IRA. That’s because these types of accounts currently qualify for a step-up in cost basis. The step-up enables a beneficiary to sell the appreciated assets they receive as an inheritance without incurring capital gains taxes on the appreciation.

Plan Separately for IRA and Tax-Deferred Assets. On the other hand, traditional IRAs and other qualified assets, considered “income in respect of a decedent,” do not receive a step-up in basis. Those assets will generally be subject to ordinary income tax rates. Therefore, a $100,000 IRA passing to a child will be taxed at the child’s ordinary income tax rate when withdrawn. A child in a 37% marginal income tax bracket who withdraws the entire account can subject the distribution to taxes at 37%.

Original Article:

Tracking #1-05167041

Work with Certified Industry Professional

Jerrí Hewett Miller CFP®, RICP, BFA


As Seen In

As Seen In

Are you seeking the confidence to move forward?

Schedule some time with us to talk and see if we’re a good fit for each other.

Securities offered through LPL Financial, Member of the FINRA/SIPC. Advisory services offered through IFG Advisory, LLC., a Registered Investment Advisor. IFG Advisory, Integrated Financial Group, and Wealth Horizon, Inc. are separate entities from LPL Financial.

FIVE STAR Wealth Manager Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2014-2019 Five Star Wealth Managers.

Women’s Choice Award® Financial Advisors and Firms represent less than 1% of financial advisors in the U.S. As of January 2018, of the 848 considered for the Women’s Choice Award, 145 were named Women’s Choice Award Financial Advisors/Firms. The Women’s Choice Award Financial Advisor program was created by WomenCertified Inc., the Voice of Women, in an effort to help women make smart financial choices. The program is based on 17 objective criteria associated with providing quality service to women clients such as credentials, experience and a favorable regulatory history, among other factors. The inclusion of a financial advisor within the Women’s Choice Award Financial Advisor network should not be construed as an endorsement of the financial advisor by WomenCertified or its partners and affiliates and is no guarantee as to future investment success.

The LPL Financial Registered Representative associated with this site may only discuss and/or transact securities business with residents of the following states:
 AL, CO, FL, GA, IN, KY, MD, MI, NC, OH, RI, SC, TN, TX, VA.