Retirement Accounts Limit Time for Heirs to Make Decisions


Beneficiaries of retirement accounts face big decisions and limited time.

Inheriting spouse has many options and limited time to decide as recently discussed by Market Watch in “Inheriting a retirement account? Lump sum payouts can be costly.”

They include:

  • Lump Sum Cash Payment – The surviving spouse has the option of cashing out the account with a single lump sum payment. This is the most costly option in terms of taxation.
  • Monthly Benefits – Most plans allow a surviving spouse to receive a monthly benefit for life. Whether this is a better option than taking a lump sum depends on the life expectancy of the surviving spouse. It is also a good choice if the surviving spouse does not want to invest the money.
  • IRA – A surviving spouse can normally transfer the account assets into an IRA. The assets will then be treated as if they were always the property of the surviving spouse.
  • Inherited IRA – Transferring into an inherited IRA is another option available to a surviving spouse. This is can be very beneficial if the surviving spouse is much younger than the pensioner.

These are the typical options, but it is important to look at the planning documents to make a final determination about which one is best in any given situation.

An estate planning attorney can guide you in your options.

Reference: Market Watch (July 25, 2016) “Inheriting a retirement account? Lump sum payouts can be costly.”

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