Sean Tanko

Las Vegas Estate Planning & Probate Attorney

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May 28 2019

Estate Planning and Your Work Pension

How to Structure Your Estate Planning Around Your Pension

If you are fortunate enough to have a pension plan through your job, it may be an asset that is part of your estate if you die before retirement which is distributed according to the rules of the plan. Here are some considerations for what happens to your pension when you pass away.

Different Pensions Have Varying Rules

Depending on how the pension is structured, the payment for the beneficiary may be different. Some pensions will pay one lump sum as a death benefit to the beneficiary. If that happens, the beneficiary must pay taxes on that amount as if it were income, and the estate tax exemptions do not apply. Other pensions will still make payments to the beneficiary as a lifetime annuity or even over a shorter period of time. It is important for your financial and estate planning purposes to know the rules of your pension plan.

Make Sure to Name a Beneficiary

Like any asset, you must make sure that you name a beneficiary for your pension plan. If not, you will lose control over who receives the proceeds of your pension when you die. The recipient may be dictated by the rules of the pension or the laws of the state where your will is administered. If you have any questions about how to name a beneficiary for your pension plan, make sure to contact an estate planning attorney in Las Vegas can offer. If you have any life changes, make sure to review and update this beneficiary as necessary.

The Beneficiary Can Still Get Favorable Tax Treatment

Depending on the rules of the pension plan, the beneficiary may not need to pay taxes on the lump-sum benefit upfront or all at once. The beneficiary may be able to roll the benefit over to another retirement plan. If they are able to do that, then they will not have to pay taxes until they actually withdraw the money. Alternatively, the beneficiary can annuitize the proceeds and pay taxes when they receive the income from the annuity.

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Written by editor · Categorized: Blog

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