In Kelly Greens’s article in the Wall Street Journal, she points out that having a Will or a Living Trust doesn’t necessarily affect your estate planning for your retirement assets. This is because retirement benefits are passed to the beneficiary named in the plan.
An individual should feel confident that his family has the ability and desire to carry out the prescribed plan. This plan includes the two spouses leaving their retirement benefits to each other, with the surviving spouse rolling over the inherited retirement plan into his individual retirement account (IRA). Then the surviving spouse would name a child and grandchildren as beneficiaries of that IRA. This way the surviving spouse would get the maximum income tax deferral from the assets, and the child and grandchildren could split up the account and stretch their withdrawals across their life expectancies.
However, if the assets are large enough to be subject to estate tax (assets over $5.34 million for federal taxes in 2014), a trust may provide the most benefit. Some income tax deferral may be sacrificed on the assets’ growth, but the savings on estate taxes will likely exceed the lost income tax deferral.
Contact an estate planning law firm for further information.