Estate Planning for the Unmarried: How Unmarried Partners Can Receive Retirement Benefits

10:09 pm Estate Planning, Retirement Planning

retirement plan e1326494532376 Estate Planning for the Unmarried:  How Unmarried Partners Can Receive Retirement BenefitsAccording to 2010 U.S. Census figures, unmarried couples comprise 12 percent of U. S. couples, a 25 percent increase in just one decade.  When it comes to retirement benefits, couples that are not married can use estate planning to ensure partners receive benefits and avoid taxes as follows:

Beneficiary Designations.  Listing your partner as beneficiary on the formal beneficiary designation forms for retirement accounts will ensure that partner receives those benefits.  Beneficiary forms must be kept up to date, as they take precedence over a will in determining who will receive retirement assets.  The same holds true for life insurance policies.

Rollovers and Distributions.  Unfortunately, many companies do not allow an unmarried partner to roll over a deceased partner’s retirement plan assets into an IRA.  Instead, they may require the surviving partner to take a lump sum distribution of the entire amount, which can carry a heavy tax burden.  When you leave your company, consider rolling over your retirement account into an IRA and name your partner as beneficiary.

Inherited Roth IRA.  The Pension Protection Act of 2006 made it possible for unmarried participants to roll over inherited retirement plan assets into an inherited Roth IRA, if the employer plan allows it.  A direct transfer is necessary in order for the partner beneficiary to take advantage of the Roth IRA, either via direct rollover or trustee-to-trustee transfer.  The beneficiary will have to pay taxes on the distribution upfront as well.

Contact us today and let our Newport Beach law firm help you with all your financial planning needs.

 

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