Tags: Retirement | retirement | when I die

What Happens to My Retirement Plan When I Die?

By    |   Thursday, 11 June 2015 11:22 PM

For many Americans, retirement savings are their biggest asset. What happens to that money at death is affected by tax and legal issues that are important to keep in mind.

Often the money can be passed along to a loved one at death by naming that person as a beneficiary on the account. AXA Equitable Financial Services advises several considerations when naming beneficiaries, including the age and ability of the person to handle the money. If the beneficiary is a minor, the court usually requires a named trustee. The same may be necessary if the person is older or for some other reason unable to handle the account.

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A trust can be the beneficiary of the account rather than an individual. The trust manages and invests the money.

A corporate-sponsored IRA is legally considered the same as a pension plan in some ways. In this case, either plan requires the spouse to be the primary beneficiary unless otherwise designated in writing by the spouse. A single person can name whomever they want as a beneficiary.

While most people will designate a spouse as their beneficiary, certain circumstances may make sense for a spouse to sign off. For instance, in a second marriage when a spouse is financially set on their own and it may make more sense for retirement money to be passed along to children from a previous marriage.

A beneficiary can avoid taxes on that retirement money by rolling it into their own IRA.

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It is also important to know that the named beneficiary will take legal precedent over a will. So, it is important in making estate planning to keep all these documents updated to your preference.

Social Security benefits can be passed along at your death. The Social Security Administration reports that children younger than age 19 who are still in high school will receive a parent’s Social Security benefit when they die. This can apply to step-children and adopted children as well as natural children.

Widows and widowers can receive Social Security benefits due to their deceased spouse as long as they do not remarry before the age of 60. The survivor's benefits do not change if the remarriage happens after the age of 60. Survivors raising children can also get benefits even if they remarry.

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For many Americans, retirement savings are their biggest asset. What happens to that money at death is affected by tax and legal issues that are important to keep in mind.
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2015-22-11
Thursday, 11 June 2015 11:22 PM
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