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You’ve Named Beneficiaries: Who in Their Right Mind Wants Their Loved Ones to End Up with Anything Less Than All of Their Hard-Earned Wealth?

by Samuel N. Asare


Why are we required to name beneficiaries when setting up a retirement plan? The answer is pretty obvious: it’s in the event that the unthinkable should happen and the account owner passes away.  

But for the overwhelming majority –if not all – of investors, there is an even more compelling reason: they do not intend to completely deplete their nest eggs during their lifetime. In fact, many retirees go to great lengths to live on as little as possible in order to leave a hefty inheritance. This is, by all means, a noble act which should be commended.

Are You in for a Surprise?

Sadly, however, most investors have not the slightest idea how much money their beloved beneficiaries will likelyreceive. Why would they not know this seemingly obvious information? Often, it’s simply a result of their advisors not addressing it – perhaps out of ignorance, considering it an unimportant detail, or out of fear of losing the client to a better alternative plan. Other investors make the erroneous assumption that their beneficiaries will end up with whatever is left in their accounts at the time of death.

It is understandable for you not to know precisely how much your beneficiaries will receive on your death; many such details are inexact anyway. But every plan has basic transfer rules, and a good advisor should be able to give their investors a pretty fair idea of what will be left to the heirs, however general. 

As an investor, you want to ask this question of your advisor, so you can learn the real answer. Please do not let your advisor downplay your question. If you are like most investors we have met, the honest response may surprise you.

Two Transfer Alternatives 

For qualified plans like 401(k)s and IRAs, beneficiaries must pay income tax on the transfer value. Notice that we are ignoring estate taxes which, if applicable, will require an additional payment. As a result, your beneficiaries will receive what is left after income taxes have been paid – meaning less than what is in your account at this moment. 

Here’s an alternative that may be new to you. The Internal Revenue Code allows certain “non-qualified” plans to transfer benefits at death, completely income-tax free.

We advise and help our clients to properly structure and own the only investment vehicle we know of – under IRS rules – that allows for tax-free accumulation, and later allows them to access their money tax-free. And when they ultimately die, the funds can even blossom in value and transfer to the heirs income-tax free!

For assistance, please schedule a no-obligation consultation by calling (877) 656-9111 or visiting today!

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This website is for informational purposes only. All opinions expressed are solely those of Laser Financial Group, LC., and our editorial staff. The information is not to be construed as any form of professional advice, nor as solicitation for the purchase or sale of any security, whatsoever. No particular outcome is guaranteed. No strategy can guarantee a profit, protect against loses, or ensure peace of mind. Recommendations are based solely on third party insurance products for which we receive compensation. Laser Financial Group, LC, does not provide investment advisory services. This does not constitute an offer to provide services in any jurisdiction in which such offer or solicitation would be unlawful under the laws of such jurisdiction. Any United States tax reference on this website is not intended to be used, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code, or promoting or recommending to another party anything addressed herein.

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