Managing Retirement Accounts After the Death of a Loved One

• Bapil Law
• September 24, 2017
• 0 Comment
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It can be a serious emotional challenge when a loved one passes away. Sorting through the affairs of the deceased can make the grieving process much more challenging. The following will provide a brief synopsis of determining how retirement account funds are processed and dispersed in the event of their passing.

Determining the Beneficiary

Retirement accounts allow for the account holder to designate a beneficiary. This arrangement is called “Transfer Upon Death.”The “Transfer Upon Death” or “Paid On Death” arrangements allow for the deceased person’s beneficiary (often their spouse), to take ownership of funds without having to partake in the probate process. Being able to avoid the process of a loved one’s will being reviewed by a probate court judge can alleviate the time, stress and expense of probate court. Often, retirement accounts such as 401K Retirement Plans and Individual Retirement Accounts (IRA) give the option for the benefactor or account holder to designate a benefactor upon their passing utilizing the “Transfer Upon Death” arrangement.

Some examples of common retirement account beneficiaries includes:

1. Spouse of the deceased
2. Parent
3. Grandchildren
4. Children

The process to take over the retirement account of a loved one is simple once the beneficiary has been established. The beneficiary is responsible for providing the following paperwork:

1. Proof of resident (often a piece of mail with your address)
2. The death certificate of your loved one
3. Documentation that designates you as beneficiary
4. Photo identification such as: a passport or driver’s license (must be government issued)

In order to avoid probate court, it is vital that the deceased designate a beneficiary. If this occurs, the retirement account is at the mercy of the courts to determine its allocation. If the deceased had serious debt, it could be claimed by creditors. In the event that more than one beneficiary is designated, the funds are divided amongst the beneficiaries depending on how many are named.

Taxes and Retirement Accounts

An accountant or estate planning attorney, like an experienced Sacramento estate planning lawyer, can help to provide clarification because it can get complicated when it comes to retirement accounts. Luckily, if you are the spouse of the deceased, you are not subject to taxation of the retirement account. However, you will be subject to both estate and income taxes in the event that you are not the account holder’s surviving spouse.

It can seem overwhelming when tackling the finances of a loved one who has recently passed. Attorneys who specialize in retirement accounts and their distribution following the death of a loved one can help to create a plan that helps sort through their affairs.

Thanks to our friends and contributors from Yee Law Group for their insight into managing retirement accounts after the death of a loved one.