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Retirement accounts often make up a large portion of your savings. After years of contributing and planning for the future, you want to be sure those funds are protected. But here’s a question worth asking: what actually happens to your retirement account if something happens to you?
Many people assume their account will automatically transfer to the right person, but without a clear plan in place, that’s not guaranteed. Let’s walk through how estate planning can help protect your retirement savings—so you can feel more confident about your financial future and the legacy you leave behind.
Know What Happens Without a Plan
If your retirement account isn’t included in your estate plan, there’s a risk it won’t be handled the way you’d want. Most accounts have built-in beneficiary rules, but those may not match your current intentions.
Here’s what can happen if you don’t plan ahead:
- Funds might go to an ex-spouse or outdated beneficiary.
- If no one is listed, the account will go through probate.
- Your loved ones could face tax burdens that might’ve been avoided.
We’ve worked with families who were caught off guard by how these accounts were distributed. It’s frustrating—and often avoidable. By taking the time to coordinate your retirement accounts with your estate plan, you can avoid confusion and protect your wishes.
Choose and Update Your Beneficiaries Carefully
One of the easiest—and most important—things you can do is keep your beneficiary designations up to date. Even if you have a will or trust, your retirement account will pass according to the beneficiary form on file with your financial institution.
Make sure to:
- Review designations regularly, especially after significant life events like marriage, divorce, birth, or death.
- Name a primary and a contingent (backup) beneficiary.
- Think carefully about naming minors or people who may not be ready to manage a large inheritance.
If you’re unsure whether your current choices still make sense, we can review everything with you and suggest any needed changes. A quick review now can prevent big problems later.
Consider a Retirement Trust
Sometimes, naming an individual as your beneficiary isn’t the best option—especially if that person is young, struggling financially, or receives government benefits. In these cases, a retirement trust can give you more control.
This type of trust lets you:
- Decide how and when the money will be distributed.
- Prevent a lump sum payout that could be spent too quickly.
- Protect the account from creditors, lawsuits, or divorcing spouses.
- Ensure a child with special needs doesn’t lose access to public benefits.
A standalone retirement trust can also help you coordinate distributions in a way that aligns with your overall goals. You get to set the rules while still providing for your loved ones. If you think this might be a good fit, we’ll help you weigh your options.
Think About Taxes
Retirement accounts often come with tax consequences, both for you and your beneficiaries. That’s why we always look at the tax side of things when building an estate plan.
Here are a few points to keep in mind:
- Traditional IRAs and 401(k)s are taxed as income when withdrawn.
- After the SECURE Act, most non-spouse beneficiaries must withdraw the full balance within 10 years.
- Naming certain beneficiaries, like a spouse or a charity, can offer better tax treatment.
We’ll help you look at who you want to leave your account to and what kind of tax impact that could have. Sometimes, a simple change—like naming a trust or a different beneficiary—can make a big difference.
Keep Everything in Sync
A strong estate plan brings everything together. That means making sure your will, trusts, and beneficiary forms are all aligned. When these pieces don’t match, your plan can fall apart—leading to delays, disputes, or unintended outcomes. We offer regular reviews and updates to help keep everything in sync as your life and goals change.
Your Retirement Account Deserves a Plan
You’ve worked hard to build your retirement savings—don’t let a lack of planning put it at risk. At Unique Estate Law, we’re here to help you protect what you’ve built and make sure it goes where you want it to. If you’re ready to create or update your estate plan, let’s talk. We’ll walk through your goals and help you make a plan that fits your life. Contact us today to get started.