Retirement Accounts and Probate

Retirement accounts provide financial stability for your future when you’re old enough to stop working. They also offer savings and tax advantages. These accounts provide you with a reliable source of income when you retire.


So, what happens if you have a retirement account that you’ve paid into and you pass away before it gets any use? Does your money get passed on through the probate process? Let’s take a deeper look at retirement accounts and how they work with the probate process?


Retirement Accounts and Probate


You’ve paid into your retirement account for years but, unfortunately, pass away before you can use your savings. So, what happens to your money? Retirement accounts are handled in many ways depending on the terms of your accounts. Let’s take a look at different ways retirement funds are managed after your death.


1.   Property of the Estate


If the owner of a retirement account dies without designating a beneficiary for their retirement accounts, the assets will not be given directly to the family or heirs without passing through the probate process. Instead, it will be valued into the estate and used to handle any outstanding debts or taxes before distributed.


2.   Beneficiaries


With most retirement accounts, you can designate a beneficiary to receive your financial assets if you pass away. Once you list beneficiaries, they can take ownership of your funds once you pass away. You can choose multiple beneficiaries. This is the best-case scenario because they will not have to go through probate to receive your financial assets and avoid estate taxes in most states.


What Happens if My Beneficiary Passes Away Before Me?


If your beneficiary has passed away before you and you haven’t designated a secondary beneficiary, then your account will be subject to probate. That’s why it’s imperative to update your estate with any changes as the years go by. In most cases, you can designate contingent beneficiaries who will only be awarded money if your primary beneficiary is no longer living. Talk to your probate attorney to answer any questions and create the right plan for your financial assets.


Tips to Handle Retirement Accounts and Probate


  1. Most financial assets are subject to estate taxes. This often isn’t the case for retirement accounts as long as you have the terms of your funds in good legal order. Talk to your probate attorney for advice on how to avoid estate taxes.
  2. Designate beneficiaries carefully. Make them aware of your accounts and policies so they know what financial assets are available when you die.
  3. If you are leaving your retirement accounts to a charity, be sure to choose a good and reliable organization.
  4. Talk to your probate attorney about any rules and regulations that can complicate your case. Probate is highly complex. Make sure you cover all your bases so your family isn’t stuck picking up the pieces as they try to grieve.


Contact Ensberg Law Group Today for a Free Consultation


If you need help with your estate planning, Ensberg Law Group is the most trusted probate lawyer in Glendora. Contact us for a free consultation.