How Retirement Assets Fit Into Your Estate Plan

February 13, 2023
Erin Caplin, Esq.

One of the most important elements of estate planning is accounting for your retirement assets. Proper planning of such assets will ensure that your financial affairs are in order during your retirement and after you pass away.


Knowing where to start when factoring your retirement assets into your estate plan can take time and effort. Our New Jersey estate planning attorneys provide some guidance around determining the value of your retirement assets, naming beneficiaries, tax implications, asset distribution, and more.

#1 – Determining the Value of Your Retirement Assets

The first step in factoring retirement assets into your overall estate plan is determining the value of those retirement assets. This can be done through various methods, including reviewing statements from your financial institution or hiring an accountant or financial advisor to assess your assets.


As you assess the value of your retirement assets, you should consider all accounts, including 401(k)s, IRAs, and other cash investments you have in stocks, bonds, and mutual funds.


By accurately evaluating your retirement assets, you can plan how they’ll be distributed after your death. Note that some retirement assets may pass directly to a designated beneficiary without going through probate. Check with your financial institution or tax advisor to understand how your retirement assets will be distributed.


Once you have a complete assessment of yourretirement assets, you can design your estate plan.

#2 – Naming Beneficiaries for Your Retirement Assets

Once you have determined the value of your retirement assets, the next step is to identify the beneficiaries of these assets. This can be an important decision not to be taken lightly. You must name each beneficiary carefully to ensure your wishes are honored.


There are a few types of beneficiaries you canname. These include:


●     Individual beneficiaries (such asfamily members or friends).

●     Charitable organizations.

●     Trusts.


When selecting a beneficiary, consider age, financial responsibility, and other factors affecting a beneficiary’s ability to manage funds responsibly. Additionally, if you name a trust as a beneficiary, ensure it’s been set up correctly and includes all required provisions.


Consider the tax implications of naming a particular beneficiary. For example, naming an individual as a beneficiary could result in income taxes on distributions made from the account.


In contrast, charitable organizations may be exempt from taxation on certain retirement plan distributions. Therefore, if you wish to donate to a charity upon death, you may consider naming them as beneficiaries.


Finally, review your estate plan regularly to ensure that your beneficiaries are up-to-date. You may find that your priorities and wishes have changed over time, which could affect the individuals or organizations you wish to benefit from your retirement assets.

#3 – Considering Tax Implications

Factoring your retirement assets into your estate plan requires keeping any tax implications associated with those assets in mind. Depending on your retirement account, there may be income tax or estate tax liabilities to consider.

  • Income Tax: Depending on the type of retirement accounts you own, such as 401(k)s and IRAs, withdrawals may be subject to income taxes. It’s advisable to consider how withdrawals from these accounts may impact your overall tax liability.
  • Estate Tax: Retirement accounts that contain pre-tax contributions are typically subject to estate taxes. As such, any money remaining in these accounts upon death may be taxed as part of your estate.


Additionally, when distributing retirement assets through an estate plan, make sure that the beneficiaries named on the account align with the beneficiary designations listed in your estate plan. A discrepancy may lead to potential tax liabilities for the beneficiary or even unexpected delays in the distribution of funds.

#4 – Deciding When to Distribute Your Retirement Assets

Consider when you want your beneficiaries to receive the assets. This may be when you pass away or reach a specific age. You’d want to consider whether you want any distributions made over a period or all at once.


Another important factor to consider is whether the distributions will be subject to taxes. Generally, the distributions from a 401(k) or IRA plan will be subject to income tax, while distributions from a life insurance policy will not. Consult an experienced estate planning attorney to discuss the best options for distributing your retirement assets.

#5 – Reviewing Your Estate PlanRegularly

Lastly, review your estate plan regularly.Depending on your circumstances, you’d be smart to review your plan annually,biennially, or every five years. This will ensure that your plans reflect yourcurrent financial situation and that all your assets are accounted for.  


If there have been significant changes in yourfinancial situation (such as inheritance, the sale of a business, or a largecapital gain), you’ll want to consider updating your estate plan. It’s alsoimportant to review any beneficiary designations on retirement accounts sincethose may change with marriage, divorce, or childbirth.


Consult a qualified attorney who is familiar with state laws and has experience with retirement assets. Your attorney can help you determine if you need to update any documents, such as wills or trusts, and can assist with tax planning. An attorney can also help you develop strategies for managing your estate after death, including distributing assets to family members or charities.


Creating and regularly reviewing an estate plan with your retirement assets in mind is essential for ensuring that your wishes are fulfilled after death. Understanding your options and creating a comprehensive plan will provide peace of mind for you and your loved ones.

Get the New Jersey Estate Planning Help You Need From BMC Estate Planning

Taking the time to make sure your New Jersey estate planning is done right starts with professional help. Set yourself up for a comfortable, stress-free retirement with help from our estate planning attorneys. Get in touch with us today to learn more about how retirement assets impact your estate plan.


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Borenstein, McConnell & Calpin, P.C. is a Wills & Estate Planning law firm serving Central and Northern New Jersey, as well as New York City. We strive not only to give you a great client experience, but to become your trusted adviser for life. To reach Alec, please send an email to

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