Welcome to Retirement A to Z, I’m Sue Burnett w Monarch Financial Advisors, and this series focuses on QRPs. There are a lot of moving pieces with these plans, and the rules are complicated and complex, so we’re going to break down these complex things called qualified plans into smaller pieces – 26 pieces, to be exact, from A to Z, with maybe a few extras thrown in for good measure. (this is the entry to all of my podcasts)
This episode focuses on the letter E: for Estate Planning. I know a lot of things, but estate planning isn’t one of them, so I’ve asked Mark Jordan, of BHMK, to join us here today. Mark is my go-to attorney for all things estate planning related, and I’m so excited that he’s here with us today.
Hi Mark, welcome!
Tell us a little about your background.
What is in someone’s “estate”? (mention 4 biggest assets)
One of the terms that I hear regarding estate planning is “probate” I don’t know what “probate” means, but it seems like it’s a headache. Can you tell us a little about how probate works?
· MJ: talk about what it is, how to avoid, if no avoidance, follow terms of the will.
What if there’s no will?
· Bond (including cost), what happens at probate
One other term I want to clear up is the ‘estate tax’ – at a high level, what is that? What assets get included to see if it applies, and what ones aren’t?
***** Break – joke about bonds, wills, probate…. I’ll leave it up to you!! *****
Since this is a podcast about retirement, let’s circle back to qualified plans and qualified money and talk about qualified plans, IRAs and life insurance. We’ll go with IRAs first, and let’s clarify, we’re talking about traditional IRAs, not Roths.
If someone has a $1M IRA, and they pass away, what could happen to those dollars?
· Spouse, charity, kids directly, trust (w explanation about what a trust is, when it’s set up, when the $$ goes in)
· Can mention stretch IRA elimination here
What’s the difference between the IRA $$ going to the kids, or into the trust, if both has to pay it out within 10 years?
Would it make a difference if it were a Roth, vs a traditional IRA?
*********Break***********
Ok, we’ve got a handle on IRAs. What about qualified plans like 401(k)’s and 403(b)s with account balances? Do those balances get rolled out into an IRA, and then they’re treated the same way?
For defined benefit plans, THIS is an answer I know! Generally, if you’re married, your spouse will automatically get the survivor benefit, regardless of what the will says – they’ll get anywhere from 50% to 100% of it, either paid as a one-time lump sum or each month over their lifetime. If it’s a one time payment, that can be rolled into an IRA, and we follow the same rules as we talked about above. If it’s paid over the spouse’s lifetime, when the spouse dies, there’s no more payments.
One thing about defined benefit plans – if you’re not married, or if your spouse dies before you, it’s possible that no payments are made for you. This is something people should check out, if they’re covered under a defined benefit pension plan.
********Break***********
Our final big asset for estate planning is life insurance. It seems like any estate atty that I’ve talked to LOVES life insurance, because it’s ‘easier’ than IRAs or other assets. Why is that? Is having life insurance better than an IRA?
· Probate, put in trust, pay over lifetime, estate tax calculation
If all I had were a big IRA, would it make sense to use some of that $$ for insurance?
More on how to convert IRA dollars to life insurance in episode S…
A few questions for you before we wrap up:
What are the basic docs that people should have for estate planning? Is it really expensive to get these done?
What are the top 3 things you’ve seen people do, or NOT do, that really screws up their estate when they pass away?
********FINAL JOKE 😊 *******************
Thanks, wrap up, will put your contact info up on the screen as we wrap up.
(the below is the ending to all of my podcasts… )
Want to learn more? Tune in to our other A to Z podcasts where we continue to break down these wonderful and complex plans into bite size pieces. Remember – how do you eat an elephant? One bite at a time.
Have any questions? Shoot me an email at MonarchFin Advisors@gmail.com. Thanks for listening in, and have a great rest of your day!