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How retirement accounts are treated after your death

On Behalf of | Jun 6, 2022 | blog, estate administration & probate |

Any assets that are held in your Indiana estate at the time of your death may be subject to the state’s probate laws. Depending on how your estate plan is structured, funds inside of a retirement plan may be held either inside or outside of your estate upon your passing.

When is a retirement account not included in a probate proceeding?

A retirement account is generally not subject to probate when you make a valid beneficiary designation. Typically, you can decide who inherits your IRA, 401(k) or 403(b) account at the time of your death, and this designation is often made when you open the account. However, it can generally be made or changed at any point after this occurs. It’s worth noting that your spouse may need to be named the beneficiary of a 401(k).

When is a retirement account included in a probate proceeding?

A retirement account is generally included in a probate proceeding if no beneficiary designation is made. In such a scenario, it simply stays in your estate until a judge can determine what should be done with it. The same is true if your intended beneficiary has passed, is a minor or is otherwise unable to inherit it. If this is true in your case, the account reverts back to your estate unless you have designated an alternate beneficiary who can take it.

Avoiding probate may be ideal if you are concerned about protecting your family’s privacy. It may also be ideal if you want to ensure that your assets are transferred in a timely manner. It may be a good idea to review beneficiary designations or other parts of your estate plan on a regular basis to ensure that it accurately reflects your final wishes.