As we have mentioned before, the new tax legislation is making things harder for beneficiaries of retirement plans. First let’s review retirement account (RA) beneficiaries in general. All retirement accounts, like IRAs, 401k’s, pensions, etc., must have a named beneficiary. What your will says does NOT matter. An RA beneficiary supersedes your will. Check with your estate planning attorney for details.
We recommend you review your beneficiaries annually. Here’s why:
- You want to make sure you have whom you wish named and named correctly. Make sure ex-spouses are removed, new spouses added, family members with name changes have been updated as examples. Plans made for beneficiaries who would not handle the RA proceeds well.
- In addition to a primary beneficiary, make sure you name a contingent beneficiary(ies), God forbid something happen to your primary beneficiary, the retirement funds will go to the contingent beneficiaries named.
- The Secure Act 2.0 (as mentioned above), does not allow a non-spouse to take advantage of an extended holding of a retirement plan beyond 10 years. (some exceptions apply) This may cause beneficiaries MAJOR TAX CONSEQUENCES!
We are currently reviewing this with all of our clients as we do every year. If you need help, please reach out, we’d love to help.
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