Retirement Benefits

Lewis J. Saret (Attorney, Washington, DC) recently published his article entitled Retirement Benefits in the Context of Estate Planning—Part I: Minimum Required Distributions, The Estate Planner (November 2011). The introduction to the article is below:

Qualified retirement plans and individual retirement accounts (hereinafter jointly referred to as “QRPs”) typically represent a significant amount of most individuals’ net worth. To illustrate, one study reported that at the end of 2008, individual retirement accounts (IRAs) alone represented 25.4 percent of total U.S. retirement wealth and 8.5 percent of U.S. household financial assets. In addition, QRPs often pass outside of an estate by means of beneficiary designations, which name the beneficiary of QRPs upon the death of the participant of the qualified retirement plan or the account owner of the IRA (hereinafter both participants of qualified retirement plans and account owners of IRAs will be referred to as “participants” for the purpose of convenience). This necessitates that QRP beneficiary designations be coordinated with the overall estate plan to effectuate the testamentary intent of the participant.

This is the first of several columns that will address retirement benefits in the estate planning context. This column focuses on the minimum required distribution (MRD) rules that apply to QRPs because an understanding of the MRD rules is essential in order to incorporate QRPs into an estate plan. Future articles will discuss the income taxation of QRPs; tax issues associated with naming trusts as beneficiaries of QRPs, including both the application of the MRD rules as they apply to trusts named as beneficiaries of QRPs and the income taxation of trusts that receive QRP benefits; and Roth IRAs.