There has been lots of angst lately in anticipation of potentially lower estate tax thresholds starting January 1. While changes to existing estate taxes may indeed be in the mix, it might be wise to review existing retirement plan (401(k), 403(b), etc.) and IRA beneficiary designations as a part of prudent estate planning.  

Many clients are surprised to learn that beneficiary designations trump their estate documents. We routinely see clients where the desires expressed in their wills don't match the beneficiary designations. As the title above infers, your beneficiary designations can present your intentions if done deliberately or something else if not.    

 
When assets in a retirement account pass to a named beneficiary, the beneficiary is usually permitted to stretch the distribution of the account assets out over time (usually life expectancy) and delay triggering income taxes. The impermanence of both estate and income tax laws place a premium on flexibility and having the ability to delay or defer taxes is beneficial.

Part of the difficulty with managing beneficiary designations is the time when these elections are usually made. In many instances they are made one time, years ago when you started work or the retirement plan became available. Most individuals can't produce copies of these beneficiary designations even with a fair degree of effort. They simply don't know.

We help clients keep track of beneficiary designations as a part of our Wealth Rx® process. As with many of the behind the scenes things we do, the impact can be substantial. We welcome your introductions to family, colleagues and friends. Don't keep us a secret.