Leaving Your Retirement Funds to Your Family
Having retirement accounts is essential to ensure you have a source of income when you have finished working, but what happens to these accounts when you pass away. Ideally, each retirement account should pass to your chosen beneficiary.
Name Account Beneficiaries
Each financial institution where you have a retirement account can provide you with a beneficiary designation form. On this form, you will list the person you wish to receive all funds upon your death. That person can take over the account when he or she provides a copy of your death certificate.
Be sure to update your beneficiary information if it changes. Each time you review your Last Will and Testament, you should also review all account beneficiary designation forms.
Using Trusts as Beneficiaries
If you don’t want to name a person to receive funds in an account, you can name a Revocable Living Trust or an Irrevocable Trust. If you name your Revocable Trust as beneficiary, those funds may be used to pay creditors upon your death. Doing so may also limit your family’s access to funds needed to pay your final expenses.
An Irrevocable Trust provides asset protection from creditors. Retirement disbursements will be paid to the name of the Trust after your death. Family members will receive payments from the Trust based upon your arrangements. Like a Living Trust, this type of Trust also limits access. This may, however, be a good way to protect the funds from a family member with poor money management skills
Safeguard Information
Once you have designated either a person or a Trust as a beneficiary, you should make a list of all retirement accounts. List the account institution, a person of contact with that institution, what if any amounts you are receiving from the account, and where your statements are located.
Keep this information secure in a fire-proof box or a safe. Advise your executor, Trustee or attorney-in-fact where to find that information when needed.
