Estate Problems As A Result of Over-Funding Your Retirement Plan
Apr 25, 2012 / By: Charles B. Pyke Jr., Estate Planning Attorney / Category: Estate Planning, Retirement PlanningIn America, we are trained from an early age to plan for our retirement. Many of us start to fund retirement accounts as soon as we start working. While planning for your retirement is undeniably important, over-funding your retirement account can create an estate planning nightmare. Excess funds that are left over from your retirement account when you die could be subject to income tax and estate taxes. As a result, the amount left over could be reduced to a small percentage of its original value. The good news is that with proper estate planning, you can both adequately plan for your retirement and protect any excess from being lost to income and/or estate taxes.
Although experts voice opinions on a regular basis regarding how much money we will all need in order to sustain our lifestyle after retirement, the reality is that there really is no way to know how much money we will actually use after we reach retirement age. You have no way of knowing how long you will live or what your health care costs will be throughout your golden years. As a result, most people plan for the worst and hope for the best. This frequently leads to a significant excess of retirement funds upon death. If you have done nothing to prepare for this contingency, those funds could be taxed as income and then taxed again as part of your estate, resulting in the loss of well over half of the funds left.
By taking advantage of the numerous estate planning tools that are available to you, you should be able to create an estate plan that continues to allow you control over the assets while you are alive, yet protects them from over-taxation in the event you have over-funded your retirement account.
Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.



