RETIREMENT PLANNING

Most of us look forward to retiring. A properly planned retirement can afford individuals with the opportunity to spend time with family and friends, travel to desired destinations, and commit time to overlooked hobbies. However, retirement planning involves more than just mathematical calculations. Successful retirement planning undertakes a comprehensive evaluation of your retirement goals, available benefits, and existing estate plan.

Our time in the workforce culminates in retirement. For those individuals approaching retirement, the transition from the active workforce to retirement may be overwhelming due to many variables. For instance, since Social Security was introduced, the average life expectancy of a 65-year-old adult has increased by nearly 50%. Statistically, individuals can now expect to enjoy nearly one third of their adult life in retirement. However, the issues affecting retirement can be complex, including determining the best time to retire, retiring in a tax-efficient manner, and preserving retirement savings for your life and posterity.

Retirement planning is not unique to individuals with a high net worth; rather, every individual can benefit from a comprehensive plan. Each individual’s retirement goals and options must be critically examined. The attorneys at The Elder Law Office of David Wingate can help you plan for your retirement years.

Our office provides guidance and formulates a plan designed to assist retirees and prospective retirees in assessing the options available from their retirement benefits, structuring their beneficiary designations, preserving benefits during their lifetime and for posterity, and identifying tax-savings for retirees and beneficiaries.

At The Elder Law Office of David Wingate, we will explain your options, provide recommendations, and guide you through the planning process. Our recommendations will evaluate the benefit options available to each retiree, implications to the beneficiary or beneficiaries, and corresponding consideration of each option through a broad framework, including income tax, inheritance tax, and federal estate tax. We utilize a comprehensive approach to retirement planning, which incorporates the recommendations into each client’s overall wealth protection plan and long-term care plan. In helping you attain your retirement goals, our firm will recommend a variety of planning strategies, including, but not limited to, the utilization of accumulation and conduit trusts, strategic beneficiary designations, and benefit plan elections.

Frequently Asked Questions

What happens to my retirement plan upon death?

Retirement plans are numerous, and the options at death depend upon the sponsored plan. Generally, an employee who is vested and eligible to participate in an employer sponsored retirement plan will be enrolled in either a defined benefit plan or a defined contribution plan.

A defined benefit plan will provide a specific dollar amount – based upon the plan formula – to the employee at prearranged intervals of time (i.e. – monthly). A defined benefit plan is what people commonly refer to as a “pension” from their employer. The employer in a defined benefit plan may give the employee an option to take less money over his or her lifetime, but in turn the employer promises to make payments to the employee’s surviving spouse, at the employee’s death.

In contrast, a defined contribution plan will provide an account balance to the employee, rather than period payments.  A defined contribution plan is considered the umbrella-term that encompasses benefits such as a 401(k), 403(b), employee stock ownership plan (ESOP), and profit-sharing plan. In such plans, the employee can exhaust the account balance during his or her lifetime, but in the event any proceeds remain in the account, the proceeds would be transferred to the designated beneficiary upon the employee’s death.

Will my Last Will and Testament distribute the remaining balance of my IRA?

An IRA is considered a non-probate asset, which will pass outside of your Last Will and Testament. The IRA proceeds are distributed according to the beneficiary designations submitted by the owner and kept on file by the administrator.

If an individual’s estate is designated as the beneficiary, the beneficiary is considered to be a non-individual. Consequently, there is no life expectancy to measure required minimum distributions from the IRA. Therefore, the IRA proceeds are subject to a “five-year rule,” and all proceeds from the IRA must be distributed by December 31st of the year containing the fifth anniversary of the owner’s death.

What happens when I inherit an IRA?

A spouse who inherits a traditional IRA can choose to: (i) become the account owner; (ii) roll the proceeds into an existing qualified account; or (iii) treat himself or herself as the beneficiary rather than the IRA owner. However, a non-spouse beneficiary has fewer options. A non-spouse beneficiary cannot contribute to the account, but the beneficiary is able to stretch the payments from the IRA over the beneficiary’s lifetime rather than the owner’s lifetime. Given the tax consequences of such decisions, The Elder Law Office of David Wingate can guide you through these options.

 

David Wingate is an elder law attorney at the Elder Law Office of David Wingate, LLC. The elder law office services clients with powers of attorneys, living wills, Wills, Trusts, Medicaid and asset protection. The Elder Law office has locations in Frederick and Montgomery Counties, Maryland.

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