Retirement Plans and Estate Planning

When you die, what will happen to your retirement plan benefits? In general, your retirement plan benefits pass to the beneficiaries you designate on the plan beneficiary designation form. Your benefits will generally be subject to estate tax at your death and to income tax when benefits are distributed from the plan to your beneficiaries.

Who receives your retirement plan benefits after your death?

You can designate who will receive your retirement plan benefits at your death by designating a beneficiary on the plan form for naming beneficiaries. (Your spouse may have certain rights in the retirement benefits.) It is generally recommended that you designate beneficiaries, their shares, and any backup beneficiaries on the plan beneficiary form.

If you do not have a named beneficiary (or the designated beneficiary predeceases you and you do not have a backup beneficiary), benefits will be distributed according to the terms of your retirement plans (which may specify certain default beneficiaries, such as a spouse). If retirement plan benefits end up distributed to your estate, the plan benefits will be distributed according to the terms in your will. However, if you do not have a will or if the benefits cannot be distributed under the terms of your will, the benefits will be distributed under your state's intestate succession laws. A typical intestate succession law might give one-half or one-third to your spouse with the balance divided equally among your children.

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