Each day hundreds of families start the estate planning process hoping to protect their family members from loss and hardship. Parents want to keep their children from losing their inheritances while spouses want to provide for each other. Unfortunately, small mistakes often result in huge losses in inheritances usually in the form of unexpected taxes. These taxes can put a huge dent in small estates, or even big estates, and in some cases heirs have found themselves with no money after paying estate taxes, death taxes, fees, and funeral expenses.
The state of New Jersey offers legal alternatives to wills that some people have started using along with wills. Estate taxes can be extremely high, especially on larger estates, and some heirs need every penny of their inheritance. By setting up a retirement plan and legally passing it on to a child, spouse, or other family member taxes can be avoided. Many people do not realize that retirement plans like IRA’s are completely tax free.
When using, or planning to use, retirement funds for future bequests there are steps that can be taken to help your heirs. One thing that can be done is to increase the amount currently being saved. Talk to children or beneficiaries and see if they are willing to help you double the amount you are currently putting aside. The more you and your children are able to save the bigger the inheritance will be!
Upon learning that retirement funds that are inherited are tax free many New Jersey estate planners wonder why more people are not utilizing this method. The problem is many people do not think of their retirement funds as assets that could potentially be transferred. Most IRA holders view their retirement plans as nothing more than a savings account for their own future. They do not see the potential to leave something for their children or grandchildren.
The process of transferring a retirement account is much easier than many realize. Companies allow investors to name beneficiaries. Some companies strongly prefer that the beneficiary be a husband but, if you insist, this can be changed to a child, parent, or unrelated individual. Once the beneficiary information has been changed all you need to do is continue investing. The funds are transferred to the beneficiary immediately after death with no tax penalties.
If you are ready to begin planning for your estate, an estate planning attorney can ensure everything is done correctly.