While it is not true for all people, many who live in New Mexico consider their family residence and retirement savings as their most valued assets. While we have previously discussed issues pertaining to creditor protection, asset management and succession planning regarding one’s home, we have not previously devoted much attention to the coordination of your retirement account and estate plans. This is an important issue because retirement accounts can pose some of the most complex issues for estate planning purposes. When proper estate plans are not created that shield retirement plans from the IRS and state taxing agencies, tax liabilities can decimate the life savings that a person has built to provide a legacy to friends, family and other beneficiaries.

If is important to make sure that your New Mexico Estate Planning Attorney knows the identity of all of your named beneficiaries on your retirement accounts. It is also important if you are using a trust as the foundation of your estate plan to ensure that the trust is set up properly to handle the retirement account in a way that will minimize tax liabilities. Depending on the size of your individual retirement account (IRA), it may be advisable to set up a separate trust with your IRA as the only asset. This will facilitate having the IRA payments extended out over each of the beneficiaries life expectancies, which will reduce the amount lost to tax liability. When the IRA is placed in its own trust, this can also provide greater protection of the IRA when it is passed to your beneficiaries.

Another valuable strategy for protecting a retirement account from excessive tax liability is to convert it into a ROTH IRA. Because there are warning signs coming out of Washington D.C. that we may soon see new tax increases, you may want to discuss the benefit of such a conversion before higher tax increases become a reality. This can yield significant tax benefits because the new growth in the IRA following the conversion is not taxable. A certified financial planner or financial advisor can review your individual situation and advise you whether conversion to a ROTH IRA would make financial sense given your unique situation. Should you need assistance in locating a suitable financial advisor or certified financial planner, please contact us.

There are other issues that should be considered concerning your retirement when engaging in estate planning. One important task is to have a durable power of attorney drafted so that the person you designate can manage your retirement accounts if you become incapacitated. An Estate Planning attorney at our Law Firm also can analyze whether your retirement is set up in such a way to maximize the growth that accrues to you while also maximizing protection to the friends and family you designate as your beneficiaries.

The above information is designed solely to illustrate general principles of law, and does not constitute a specific legal opinion on individual cases. We suggest that you contact experienced legal counsel for a specific opinion tailored to your individual circumstances

If you have questions about estate planning, our New Mexico Estate Planning Attorneys at Jay Goodman & Associates offer a free consultation in our centrally located offices in Santa Fe and Albuquerque so that we can discuss your options. Call us today to schedule your free consultation at (505) 989-8117 to learn about your rights.


Comments are closed