Arkansas residents might have a lot of questions when it comes to dealing with estate planning, especially when it comes to the often forgotten assets.
It’s easy to remember to put your home and bank accounts into your estate plan. But it might be harder to remember your retirement account, especially if you’re not actively using it.
What happens to your retirement account?
Your retirement account will often end up going to the designated beneficiary. If it’s set up properly, the transfer of your retirement account to the beneficiaries is practically seamless.
This means that your beneficiaries – often your spouse or children – will have access to the account immediately. But if you don’t set up the beneficiaries correctly, or haven’t updated them, it can cause problems.
Sometimes it’s an ex-spouse or a deceased parent that’s still listed as the beneficiary, or there’s no beneficiary at all. When this happens, your retirement account will be sent to probate and it’ll be up to your surviving family members to figure it out.
What if a retirement account goes into probate?
Retirement accounts that go through probate incur estate taxes. This means that when your retirement account is passed on to your surviving family members, they’ll lose a chunk of it to taxes.
Usually, your retirement account is safe from debt collectors after you’ve passed. But if it ends up in probate, it becomes vulnerable to creditors.
It’s important to manage retirement accounts and update the beneficiaries, and any other outstanding information, as needed. Even if you’re not actively using your retirement account, keeping it updated will save your family a lot of time and headaches after you’re gone.