Estate planning and retirement planning are often multistep processes that you must continuously adapt as your life changes. Be it marriage, the birth of a child, job changes, death–all of these events will lead to changes in your Tennessee estate planning process, as you well know. But how about your retirement benefits?
At Martin Heller Potempa & Sheppard, PLLC, we work with you to ensure that the retirement plans you have created not only fit into but also complement your estate planning.
As part of your estate plans, you should be making a list of all retirement accounts, investments, and any additional benefits that you would want to pass on at your death. On that list should include any of the following that are applicable:
Employment pension plans
Along with the type of account or plan it is, you need to provide your managing institution name and contact information, any identification numbers or passwords, how much of a benefit you currently receive, and share the location of where you keep your documents that outline the benefits you receive.
In addition to supplying information about the plans and benefits included, you need to name beneficiaries for those programs–not within your will. Rather, you should have the option through the financial institution or program to name a beneficiary at the time of your passing.
Do Surviving Spouses, Children Have a Right to Retirement Benefits in Tennessee?
You may think whatever is yours at the time of your passing becomes your spouse’s, but the reality is not so. Though a 401(k) provides protections for a surviving spouse, an IRA does not.
A 401(k) is employee-based and is governed by the Employee Retirement Income Security Act of 1974 (ERISA). Under ERISA, a surviving spouse is generally the automatic beneficiary of a retirement plan. So, if the spouse wants to name a different beneficiary, it must be done in writing.
However, an IRA is not governed by ERISA, and does not offer this automatic beneficiary status. Generally, this is also true of a 401(k) rolled into an IRA. In order to make your spouse the beneficiary of your IRA, you must specifically name your spouse as such. You can do so by filling out a beneficiary designation form.
Taxation on Retirement Benefits in Tennessee
Many families think listing their retirement account beneficiaries in their will or living will help to avoid probate. In general, estate planning attorneys and financial planners would advise you against this, as it can alter some of the terms of the benefits. This depends on the type of account, which is why you should seek legal advice.
Taxation on retirement benefits is obviously also something to be considered. However, in Tennessee, you do not have to pay taxes on retirement income via 401(k), IRA or pensions; and Social Security benefits.
Who will inherit my Social Security benefits?
After you pass, you may wonder who will be entitled to your Social Security benefits. In general, an eligible beneficiary will receive monthly payments until the full retirement amount has been given.
For your spouse to receive the benefit, he or she must be:
At least 60 years old or 50 years old and disabled; or
Any age if you have children under age 16 or the child is disabled
If you do not have a spouse but do have children, they may be entitled to your benefits if they are:
Under 18 years old
Attending elementary or secondary school full time
18 years old or older but are severely disabled
Estate and retirement planning can seem complicated and stressful. But the more information you can provide to your loved ones, the better. This will not only prepare them to live out your final wishes but will ensure that the proper individuals are entitled to your estate and retirement benefits.
At Martin Heller Potempa & Sheppard, PLLC, our estate attorneys will guide you through the estate planning process with the compassion and expertise needed to ensure your end-of-life plans match your wishes. With years of experience in estate planning and administration, we know how to best protect your assets and prepare for the unknown.
If you’re ready to create a trust, set up a power of attorney, or write your will, we’re here to help. Contact Martin Heller Potempa & Sheppard, PLLC now for more information.