Understanding Probate

Paying income tax on most retirement distributions

When you die, you leave behind your estate. Your estate consists of your assets — all of your money, real estate, and worldly belongings. Your estate also includes your debts, expenses, and unpaid taxes. After you die, somebody must take charge of your estate and settle your affairs. This person will take your estate through probate, a court-supervised process that winds up your financial affairs after your death. The proceedings take place in the state where you were living at the time of your death. Owning property in more than one state can result in multiple probate proceedings. This is known as ancillary probate.

How does probate start?

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Choosing a Beneficiary for your IRA or 401(k)

Selecting beneficiaries for retirement benefits is different from choosing beneficiaries for other assets such as life insurance. With retirement benefits, you need to know the impact of income tax and estate tax laws in order to select the right beneficiaries.  Although taxes shouldn’t be the sole determining factor in naming your beneficiaries, ignoring the impact of taxes could lead you to make an incorrect choice.

In addition, if you’re married, beneficiary designations may affect the size of minimum required distributions to you from your IRAs and retirement plans while you’re alive. Continue reading “Choosing a Beneficiary for your IRA or 401(k)”