Tags: wills | retirement | assets | Zweig

WSJ's Zweig: Wills Don't Cover Distribution of Retirement Assets to Heirs

By    |   Tuesday, 08 Apr 2014 02:40 PM

You might think that if you designate in your will that all your assets should be divided equally between your children, that's what will happen to your IRAs and 401(k) accounts.

But that's not the case. Your retirement assets are divided up according to how you designated your beneficiaries for each retirement account not your will, writes Jason Zweig of The Wall Street Journal.

And it's not simply an academic issue. Americans hold $5.9 trillion in 401(k) and other defined contribution plans, in addition to $6.5 trillion in IRAs, according to the Investment Company Institute.

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Zweig cites the case of a man whose will apparently called for all of his assets to go to his children. But his 401(k) account accounted for much of his wealth. And the 401(k) money ended up going to his wife of just two months.

Given the importance of IRAs and 401(k) accounts in wealth accumulation and then distribution upon death, Stewart Sterk and Melanie Leslie of Yeshiva University law school call retirement accounts "substitute wills," Zweig notes.

If your major worry right now is building up your retirement wealth rather than how it will be distributed after you die, you have until April 15 to make a 2013 contribution to your IRA.

But high earners beware: if you have a 401(k) or similar account at work, you won't be able to give to your IRA if you make too much money. The benefit is phased out for people with modified adjusted gross incomes between $60,000 and $70,000 in 2014, according to U.S. News & World Report.

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You might think that if you designate in your will that all your assets should be divided equally between your children, that's what will happen to your IRAs and 401(k) accounts.
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2014-40-08
Tuesday, 08 Apr 2014 02:40 PM
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