Estate planning can involve a variety of tangible and intangible concerns. In addition to passing property to heirs, an individual may wish to impart certain personal meanings or lessons.
For example, although minimizing tax obligations may be a legitimate concern, many individuals may also want to contribute to their family’s unity and values for generations to come. But how can an individual plan for the possibility of his or her young children’s future college expenses or the needs of future grandchildren?
One limitation with wills and even contractual beneficiary designations in life insurance or retirement accounts is immediacy: The property often passes directly to the named beneficiary upon the grantor’s death. That’s certainly true with property named in a will.
But even with retirement accounts like a 401(k) or an IRA, the beneficiary that inherits the proceeds may be forced into minimum distributions calculated according to a beneficiary’s age and life expectancy. One solution might be for a beneficiary to roll over an inherited retirement account into his or her own retirement account, and/or name new beneficiaries to the account.
Readers may also not have realized that a trust can be named as a beneficiary on life insurance or retirement accounts. For example, an irrevocable life insurance trust might contain the proceeds of a parent’s life insurance policy. A minor child could even be named as a successor trustee after reaching a certain age, thus protecting those assets from his or her future spouse.
With so much at stake, readers deserve to be informed about the benefits associated with various types of trust. Check out our firm’s estate planning page to learn more.
Source: Washington Post, “How to pass money on to your children,” Jonelle Marte, Nov. 3, 2014