Retirement Assets Are Exposed to
Income Taxes and Estate Taxes 

One of the problems with retirement plans is that they are exposed to income taxes and federal estate taxes.  Without proper beneficiary designations on file, and related advice with respect to rolling these plans over, the tax consequences can be devastating.  Advance planning is crucial to help ensure unnecessary taxes will not be imposed.

Fortunately, with proper planning, retirement plans can be placed in credit shelter trusts (trusts that are not exposed to the federal estate tax).  Furthermore, the tax deferred nature of the plans can also continue even if the beneficiary is a non spouse such as a child or a trust for the benefit of a loved one. 

As you may imagine, the rules are exceedingly complex.  Every case needs to be looked at closely in order to preserve income tax deferral and avoid federal estate taxes.  The beneficiary designation on file controls and accordingly it is the beneficiary designation that needs to be crafted to work within the current law and the particular family plan to achieve favorable results.

Contributed by:

Mark F. Winn

Attorney at Law, PLLC