What Happens to Your Retirement Account When You Die?

What Happens to Your Retirement Account When You Pass Away?

Whether your retirement account is a 401K or an IRA, it is likely to be one of your largest assets by the time you retire.
A retirement account is also an important part of a comprehensive estate plan. But what happens to the balance of this account
after your passing?

Beneficiaries

When your retirement account was created, you completed a beneficiary form. The person listed as the beneficiary will receive
the remaining balance in the account. It is important to keep this information updated, especially since major life events
can occur over the many years the account exists.

Avoiding Probate

One major benefit of having a named beneficiary is that the account can avoid probate — the legal process of administering an estate.
Avoiding probate allows funds to transfer more quickly, helping beneficiaries meet immediate needs.

Spousal Rights

Many retirement plans require that a spouse be named as the primary beneficiary. Some plans allow you to name another beneficiary
only if your spouse gives written, notarized consent. This is why it is essential to review all beneficiary forms — for both
retirement accounts and life insurance — after major life events such as marriage, divorce, childbirth, or purchasing a home.

Consequences for a Beneficiary

A beneficiary will have several options for handling the account, depending on whether they are a surviving spouse.
Common options include:

• Rolling the funds into their own retirement plan (for surviving spouses);
• Cashing out the account completely;
• Electing to continue treating the account as the deceased spouse’s account.

An estate planning attorney can help ensure that your retirement plan aligns with your overall estate plan and long-term goals.