Disposing of Qualified Retirement Benefits

401(k)s and Other Qualified Retirement Benefits

Our attorneys at Taylor, Ganson & Perrin, LLP are often surprised to learn that a client of moderate or even substantial means has not gone through an estate planning process. Individuals are frequently surprised to learn how extensive their assets are. They usually have some idea of the value of their house, but often are unaware of the worth of their retirement benefits. Furthermore, they frequently do not understand the tax advantages that qualified retirement plans, such as 401(k)s, may bring to a retiree. With careful tax planning, the advantages may be continued after the employee reaches retirement age. To learn more about planning for disposing of qualified retirement benefits, contact our Boston attorneys.

Because Social Security was not intended to cover all costs of retirement, it is important to plan the best way to use qualified retirement benefits such as 401(k)s.

A retirement plan is qualified if it meets the requirements of the Internal Revenue Service (IRS) and of the Employee Retirement Income Security Act (ERISA). Commonly used plans in this category include:

• 401(k) Plans
• Keogh Plans
• SIMPLE Plans
• Tax-Sheltered Annuities or 403(b) Plans
• Government or 457 Plans

Such plans allow employees to use pre-tax dollars to fund them, paying taxes only when the funds are withdrawn.

Our attorneys often advise clients to begin taking the benefits as early as allowed by the plan—usually at age 55. This will reduce estate taxes after death. In some cases, it may be possible to convert the benefits from a qualified plan into an IRA or a Roth IRA, continuing the tax advantages of a deferred compensation plan such as 401(k).

Using strategies such as these, we help clients plan for the most effective way to dispose of their qualified retirement benefits, striving to minimize estate taxes to beneficiaries and income taxes during the lifetime of the client. We also make sure that beneficiaries of qualified retirement plans are named in a way that minimizes the tax implications to the estate.

To learn how our lawyers can help you plan for the best way to structure your qualified retirement benefits, contact us at Taylor, Ganson & Perrin, LLP.