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Addressing retirement accounts during estate planning

On Behalf of | Dec 11, 2020 | Estate Planning |

Saving for retirement is an important part of planning for the future, and many people in Tennessee use IRAs to do so. However, it is not uncommon for someone to pass away before using all — or any — of the funds. This can be addressed during estate planning, when a beneficiary can be named both on the account and even in the will. Those who have already dealt with this matter may need to return to the matter as well, as new rules may affect their decisions.

In the past, assets of nontraditional IRAs could be distributed to beneficiaries over the remainder of their lifetimes.  In 2019, the Setting Every Community Up for Retirement Enhancement Act limited the asset distribution window for non-spouse beneficiaries to just 10 years. There are exceptions to the new rule, including:

  • Siblings and partners who are younger by 10 or fewer years
  • People with disabilities

This means that people who had previously planned to name their children or grandchildren as beneficiaries with distributions spread out over decades need to rethink their arrangements. For example, rather than go with traditional advice to leave traditional IRAs to children and different assets to spouses or partners, people may want to consider the opposite. However, it is important to note that the 10-year window for distributions does not start for minor beneficiaries until they hit the age of majority, so this may still influence decisions.

Planning for retirement can feel difficult enough without adding in the pressure of estate planning. This does not mean that one should simply focus on one and not the other, though. Instead, some people in Tennessee find it helpful to speak with a knowledgeable attorney about their options for incorporating their retirement plans and named beneficiaries into their estate plans.