Incorporating Your Retirement Assets Into Your Estate Plan

Whether you are already retired or just planning for your future, aligning your assets with your goals is central in your estate planning. Do you want to contribute to your favorite charities or leave most of your assets to your next generation after you pass on? However, it’s important to keep in mind that your cash resources must be sufficient to pay your annual expenses and sufficient to meet unexpected medical emergencies and long-term care needs in retirement.

Cash Is the Asset That Secures All Others

As your assets pass to your heirs, you need to leave enough liquid capital to pay your household bills for six months plus your property taxes, insurance payments, and an emergency fund. Your emergency fund should be enough to replace your heat and air conditioning system or at least enough for a down payment on a new roof. Even if your heirs are planning to sell your primary home, repairs may need to be made on it before it enters the market. If you have liens on jointly owned personal or business property, the loan balances become due when you die or stop making payments on it.

Investments and 24-month individual retirement accounts (IRAs) may pay the most interest, but you need access to cash to avoid having to use your credit cards at high interest rates or pay penalties for dipping into an IRA before it matures. Your heirs or beneficiaries could lose their intended inheritance or endowment if you don’t leave sufficient available cash on hand to deal with the monthly expenses while your affairs are sorted out.

Transferring Your Wealth to Your Beneficiaries

Savings, checking, and investment accounts, retirement plans, and insurance policies are assets that pay your beneficiaries immediately when you die. Transferring as many assets as possible directly to your business partners, charities, and loved ones with payable on death clauses helps them take care of you if you are suddenly permanently disabled, require nursing or hospice care, or if you die suddenly. Estate planning secures your business assets, plans the succession of your business, and ensures that your successor has sufficient funds to successfully operate your business without the burden of unnecessary assets and business endeavors.

Donating Assets to Charities Maximizes Your Contributions and Tax Deductions

You can donate your share of your jointly owned assets to your favorite charity. However, your favorite charity does not want a contested share of your family business. You must liquidate your share and donate the cash value from the sale to the charity. You can donate an asset to your community foundation to collect substantially more interest and pay no taxes on the money. You can deduct the accrued interest over a period of five years with one-third of the value of the donation deducted in the year following the donation.

New Jersey Estate Planning

Our New Jersey estate planning lawyer can create a trust containing beneficiary deeds for all your real property that will be transferred upon your death. Beneficiary deeds override wills, and beneficiary designations on life insurance policies, retirement accounts, and trusts are not altered by wills. Our business lawyer can create limited partnerships, calculate the value of your business, sell your share of your business, and act as a fiduciary transferring your share of your wealth to your trust or your beneficiaries. Astute in all aspects of business law, mergers, acquisitions, and tax law, our New Jersey estate planning lawyer can help you and your heirs with:

  • Disputed wills and creditor’s claims
  • Trust accounting and taxation
  • IRA balances, pensions, and retirement accounts
  • Firearms, safety deposit box contents, and jewelry
  • Special needs provisions for relatives

Individual Retirement Accounts

IRAs are an excellent way to grow your funds while you’re alive as they offer certain tax advantages. However, when you die, if the assets are still in the form of a typical IRA, there will be a sizeable tax deduction when your heirs cash out those assets. The best way to avoid your heirs having to pay a substantial tax is to convert those IRAs to Roth IRAs whereby you’ll pay some taxes on the funds when you convert the account, but your heirs will pay a lot less when it’s time to close out those accounts.

The Knee Law Firm, LLC.

With over 60 combined years of legal experience, our lawyers also represent fiduciaries, personal representatives, heirs, and interested third parties in trust and probate administration and litigation. Call our Hackensack, New Jersey, estate lawyer at 201-996-1200 for a confidential initial consultation to discuss your estate planning or probate needs.