Weekend Reading: Planning for Retirement Assets in Your Estate Plan

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
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Weekend Reading

As part of our Retire With Purpose planning framework, we believe tax efficiency should act as a common thread throughout your investments, and that includes within your estate plan. Some assets make more sense to utilize in retirement, while others are better passed down to a beneficiary or charity. Either way, it all comes down to your financial goals and understanding the flow of your savings to both retirement income and heirs. Read the article from Kiplinger below.


At the core: Prior to establishing legacy-based savings, you should first identify your core assets and investments. This would include stable sources of income, such as pensions, annuities, and Social Security, as well as tax-deferred accounts, such as a traditional IRA. Your core capital includes necessary income to cover your living expenses, as well as reserves for long-term care and any unexpected costs.

Labeling your legacy: Once you’ve earmarked the funds needed for your everyday retirement expenses, you can then separate any excess capital out and keep it on reserve for wealth transfer. When it comes to these assets, the article points to several steps for maximizing tax efficiency:

📌 Establish a plan for taxable assets: Children and other individuals can often benefit more from inheriting highly appreciated taxable investment accounts, versus a traditional IRA. These accounts qualify for a step-up in cost basis, which permits beneficiaries to sell the assets as an inheritance without incurring capital gains taxes on the appreciation.

📌Plan separately for IRA and tax-deferred assets: Traditional IRAs and other qualified assets do not receive a step-up in basis, making them subject to ordinary income tax rates. In order to help let these assets grow tax-free for heirs, any traditional IRAs or qualified plan assets that are to be inherited can be converted to a Roth IRA, with taxes paid upfront. However, SECURE Act implications should be accounted for as well.

📌Segregate assets earmarked for charity: Naming a charity as the beneficiary allows the organization to receive assets tax-free; plus, makes the account owner’s estate eligible for deduction of federal and state estate taxes.

Take note: The two big takeaways here are to make these intentional decisions as early as possible and regularly revisit or update your strategy. Don’t neglect this until you “think” you’ll die. You’ll never get the timing right.