Did you know that your will does not determine who gets your IRA or your 401(k) account when you die?

That’s right – these accounts are “non-probate” assets, which means they’re not covered by your will. Instead, they will generally go to whatever person you named as the beneficiary when you set up the account.

Similarly, your will doesn’t determine who gets your life insurance – that will go to the named beneficiary on the policy. And your brokerage account might have a beneficiary as well.

So as part of your estate plan, it’s essential from time to time to review your beneficiary designations.

For example:

You’ve remarried, but you want to leave your 401(k) to your children from your prior marriage. Under federal law, even if you name the children as beneficiaries, your account will go to your new spouse – and not your children – unless your new spouse signs a waiver.

Is one of your beneficiaries a trust? If so, it’s a good idea to have this reviewed. There have been a lot of developments in the law recently, and you might want to change the way the trust is set up in order to make sure you’re still getting all the possible tax advantages.

Is your estate listed as your IRA or 401(k) beneficiary? This is generally a bad idea, because you can often save a lot of taxes by naming individual beneficiaries instead and stretching out payments over time.

Is one of your beneficiaries a minor? This could require going to court and setting up a guardianship, which can be time-consuming and expensive. There are better alternatives.

Do you plan to leave money to charity? It might be wise to leave IRA or 401(k) assets to charity, rather than other assets. That’s because heirs who receive IRA distributions have to pay income tax on them, whereas they probably won’t have to pay tax on other assets.

The Law Corner Raleigh Estate Plans

There are four basic planning needs for all individuals independent of income, assets, debts, health, age or status. They are the Will or Will with Testamentary Trust, a Living Will,Financial Power of Attorney, and a Health Care Power of Attorney. These documents are perhaps the most important legal documents the average American will ever sign. Yet, the overwhelming majority of adults in the United States do not have one or the other. There are many misconceptions as to whether someone needs estate planning. To learn more, click the subject areas above. I am sure you will gain an understanding of the importance an estate plan plays in all our lives.

Thank you for visiting us on the web, we look forward to serving you. Call (919) 424-8319 and schedule an appointment. Please make sure to bring any prior estate planning documents with you.

The Law Corner Attorneys help people all over Wake County to include the following areas: Knightdale, Wake ForestRaleighMorrisville, Apex, Wendell, Zebulon, New Hope,CaryRolesville, Fuquay-Varina, Holly Springs, andGarner.