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New retirement plan feature may impact estate planning

Advances in medicine have unfortunately been accompanied by rising costs of healthcare and medication. Consequently, any serious discussion about estate planning must include a projection of retirement needs. More than ever, the prospect of outliving savings and assets in retirement could become a reality.

Federal officials at the Internal Revenue Service and the U.S. Department of the Treasury also recognize this possibility. In order to encourage more long-term planning for the high cost of medical care that may be needed in retirement, both entities recently finalized a new tax regulation. 

The new law essentially enables retirement plan holders to invest a portion of their plans into a deferred lifetime fixed-income annuity. The start date for payments under that type of security are usually late, starting when an investor reaches between 80 to 85 years of age. 

Admittedly, there are other deferred fixed-income annuities that can be held inside a retirement plan. However, the new regulation’s approach, called longevity insurance, has special benefits. An attorney that focuses on estate planning can provide clients with the details.

Annuities are just one example of the ways that individuals can help plan for their future, as well as the future of their children or other heirs. With longevity insurance, individuals may be able to avoid depleting their assets in retirement, ensuring that heirs and beneficiaries receive the property that was originally intended for them. By combining annuities with other estate documents, such as wills and trusts, individuals can create a comprehensive approach to their long-term needs and legacy.

Source: The Wall Street Journal, “6 ways a new tax law benefits a sustainable retirement,” Robert Klein, July 25, 2014



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