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Estate planning considers retirement funds and their distribution

In Ohio and all other jurisdictions, retirement funds do not usually go through one's probate estate after death. That is because such proceeds are nearly always distributed to specific beneficiaries designated on the retirement plan itself. It is possible to also list an alternate beneficiary to receive the retirement funds if the primary beneficiary predeceases the owner of the fund. The treatment of retirement funds in estate planning is important despite the fact that the funds do not usually pass through the decedent's estate.

The first estate planning mistake that one may make with respect to retirement funds is in failing to list a beneficiary on the retirement papers. This can be an oversight that the owner intended to go back and correct by adding the desired choice. Or, it may be a case where the beneficiary died prior to the death of the retirement fund owner thus leaving a fund with no listed beneficiary. If the fund owner fails to list a replacement, and if there was no alternate beneficiary originally listed, then the funds would default to the decedent's probate estate.

The latter outcome is usually a significant mistake.  For one thing, money that has to go through probate generally will not be distributed until the estate is nearing completion, which can be from six to 12 months or longer. The intended but not listed beneficiary could have received the proceeds within weeks after the fund owner's death. There may be other undesired results, such as taxes or fees. 

Including a living  trust in one's estate planning can serve as a way to distribute retirement funds without making the distributions directly to specified individuals. Distributions from such a trust will not go through the probate estate. This method gives the trustee the flexibility in making measured distributions where it is desirable. The best way to know that one's estate planning vision is in proper legal order is to work closely with a trusted estates attorney who is familiar with the specifics of Ohio estate planning procedures. 

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  • Ohio State Bar Association | Connect.Advance.Succeed
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