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Estate Planning Considerations at Retirement

Edge Magazine

Retirement – one of the most enjoyable milestones in life, especially if you reach it with good health and enough savings. While there are many things to think about, it is also a good time to refresh your estate plan. When did you last review your beneficiary designations? Do you know the amount of taxes your retirement accounts are going to generate and when?

By the time you are retiring, your children may be well into their careers and you may be blessed with several grandchildren. Have you recently thought about the provisions you have in place for them? Perhaps your objectives have changed.

You also need to consider the income tax consequences of your qualified retirement plan assets – that is, since you have put money into these accounts on a tax-deferred basis, income tax will be payable when you or your beneficiaries take distributions. Current federal law dictates when distributions from qualified retirement plan accounts must occur. The longer you can delay distributions under these rules, the longer the balance may continue to grow unencumbered by tax. Therefore, who you designate as your beneficiary impacts how soon and how much income tax will be due.

Ordinarily, an individual beneficiary is required to withdraw the balance over his or her remaining life expectancy. For your child or grandchild, this could allow for many years of continued growth. If your trust is your beneficiary, in many instances the balance must be withdrawn over a five-year period. However, a properly structured trust may allow for a longer withdrawal period, and therefore a longer period for additional growth. Your surviving spouse is the ideal beneficiary, because your spouse can simply roll the balance to his or her own retirement plan account and delay required withdrawals until reaching age 70 ½. Regardless of when amounts are withdrawn, the distributions constitute taxable income to the beneficiary and are taxed at that beneficiary’s tax rate.

Charities are great beneficiaries for qualified retirement plan assets because qualifying charitable organizations will not pay income tax on the distributions. Therefore, your entire account could be available to support the charity and the constituents it serves.

As you approach retirement, you should work with a knowledgeable attorney. By doing so, you’ll rest assured that you have an estate plan in place that meets your objectives in a tax-efficient manner. Then you can focus on enjoying your retirement, which just may include spending your retirement savings!


I am a shareholder of Koley Jessen P.C., L.L.O., located in One Pacific Place. My practice is focused on estate and tax planning. Outside of the office, I enjoy spending time with my husband and our three children. For help with your family’s estate planning needs, please contact me directly at 402.343.3881.


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