There are valid reasons to make an adequate and accessible record of one’s retirement accounts. After death, an individual’s survivors will want to file claims for any outstanding benefits, and if said individual ever becomes incapacitated prior to death, the person in charge of their finances will have to manage those accounts for the subject individual.
To make these tasks easier for one’s loved ones or family members, a person should keep a list of basic information about their retirement accounts, pension plans, and Social Security benefits, etc. There are some essential guidelines on what may happen to retirement benefits after death.
Each of one’s retirement accounts and pension plans should specifically name a beneficiary, rather than using a Last Will & Testament to name beneficiaries for the retirement plans. Money remaining in the accounts at death, as well as any pension payments due to the deceased owner, will pass directly to the beneficiaries named or designated, without the complications, inconvenience, and expense of a Probate Administration in the court system.
For some plans, including 401(k)s and most pension plans, the law requires a person to name their spouse as beneficiary unless he or she signs a form giving up that right. For IRAs and employer profit-sharing retirement plans, one may name any beneficiary they choose. If they live in a community property state, such as California, however, one must be aware that a spouse has a legal right to half of the money that the other spouse earned during marriage. If a person is married and does not want to leave all retirement benefits to their spouse, one should seek the advice of an attorney to ensure they know the applicable laws, rules, or regulations.
If one has created a living Trust to avoid Probate, it is generally not wise to name the Trust as the beneficiary of the retirement accounts. Retirement funds are already exempt from Probate, and by naming a Trust as beneficiary, inheritors (individual heirs or beneficiaries) are likely to lose some of the benefits and flexibility they would otherwise have.
After death, a person’s family may be entitled to Social Security survivor benefits. Eligible family members will receive monthly payments, i.e., as much as the full retirement amount that would have been paid to the deceased party.
A spouse of a deceased party qualifies for benefits if he or she is:
- at least 60 years old, or
- at least 50 years old and disabled, or
- any age, if he or she is caring for your child, and the child is under age 16 or is disabled and receiving Social Security benefits.
A deceased party’s unmarried children are entitled to survivor benefits if they are:
- under the age of 18, or
- between 18 and 19, but attending elementary or secondary school full time, or
- age 18 or older and severely disabled, with a disability that started before age 22.
Other eligible survivors may include a deceased party’s dependent parents, divorced spouse, stepchildren, and grandchildren.
In addition to ongoing survivor benefits, a surviving spouse or minor children may also be eligible for a one-time payment of $255 upon an individual’s death. For additional information, review the Social Security website at www.ssa.gov .
It should not take long to make a record of one’s retirement plans and accounts. Taking a little time to do it now may save a person’s loved ones and/or family members a great deal of trouble later.
At minimum, one should make a list of every plan that they have, whether or not it pays benefits now, or expect benefits in the future. Remember to include:
- employer-sponsored plans or pensions,
- IRAs (traditional, Roth, SIMPLE, or SEP-IRAs), and
- Keogh, profit-sharing plans, or self-employed 401(k)s for small business owners.
For each account, list the following information:
- the name of the managing organization or financial institution,
- the account or identification number,
- contact information for the account manager or adviser (if any),
- whether or not one is currently receiving benefits, and if so, how much, and
- the location of the plan statements.
An individual should also list and describe their Social Security benefits, including those based on their earnings (or disability) that go to one’s family members as well as those they expect in the future.
It is crucial to review one’s list of accounts and benefits periodically. Update records if a person acquires or terminates a plan or changes the location where one files their plan statements.
Distinct items of a person’s retirement information may be sensitive, so an individual should want to file their list in a secure location, such a locked cabinet or fireproof safe at home or bank safe deposit box. However, it is critical to advise those persons closest to them where the information is located and how to access it. Most importantly, if one has named a Personal Representative or Executor in a Last Will & Testament or an Agent under a Durable Power of Attorney for financial matters and/or under a Healthcare/medical power of Attorney, be certain those designated individuals can locate, ascertain, or access this vital information when needed.
If you have any additional Questions regarding the foregoing or have any legal issue or concern, please contact the law firm of CASERTA & SPIRITI in Miami Lakes, Florida.