If you have an estate plan (a Will, Trust, Power of Attorney and Advance Health Care Directive), you're a planner. Good job! With your estate plan, you've made your families life easier in the event of your passing. The probate process is high stress and expensive.
But did you remember to fill out the Beneficiary Designations of your retirement account? IRS rules prohibit IRAs and 401Ks trust transfers. But retirement accounts can and should have beneficiaries, in case the owner dies before the money is withdrawn. These are called Beneficiary Designations. Completing one is as simple as asking the financial institution to send you the form.
Real life story: Dave created a Will and Living Trust but he did not name a beneficiary to his IRA. Dave died unexpectedly at 55. Because Dave's IRA did not name a beneficiary, the IRA became part of his probate estate. He thought his family would never have to deal with the courts after he made his Trust. But by not naming someone the inherit his IRA the IRA had to be probated.
It took approximately ten months to complete the probate. A large percentage of the IRA funds were used to pay attorneys and court filing fees. Even more concerning, his family who received the lump sum IRA proceeds after the probate, had to pay income taxes on the amount received! Filling out a simple form could have saved thousands of dollars, avoided necessary income tax to his family and avoided stress.
About the Author: Duisters Law, APC - Wills and Trusts Attorneys