Most Michigan residents have some form of retirement savings. The most common types of retirement accounts are IRAs, 401(k) plans, and Roth IRA plans. Each has specific rules governing how and when withdrawals are made. In addition, there are significant estate planning implications for handling retirement accounts.

Is an IRA a Probate Asset?

Unlike most personal property that passes under a person’s will or living trust, retirement accounts usually have designated beneficiaries. If you have an IRA, for example, you can name a primary and contingent beneficiary. Upon your death, the account passes automatically to the primary beneficiary if he or she survives you; otherwise it goes to the contingent beneficiary.

Any such beneficiary designation overrides any contrary provision in your will or trust. This is because a retirement account is not considered an asset of your probate estate or trust unless you specifically name it as the beneficiary. If you fail to name a beneficiary, or all of the designated beneficiaries die before you, the retirement account will then be considered a probate asset. It is a bad idea to name your own estate as beneficiary, however, for tax reasons.

The Tax Implications of Inheriting a Retirement Account

So what are those tax reasons? As you probably know already, with a traditional IRA or 401(k) plan the account owner makes tax-free contributions while they are working. Upon reaching retirement age (usually 70 years and 6 months), the owner must make annual withdrawals, which are taxed at that time. A Roth IRA works in reverse: contributions are taxed when made, not upon withdrawal.

Now, normally when someone inherits property it is not subject to income tax. But if a person inherits a 401(k) or traditional IRA–say a father names his daughter as beneficiary–then income tax is due when the beneficiary makes withdrawals from the account. There is no income tax on an inherited Roth IRA, since tax was already paid when the original owner made contributions.

In many cases, a person will name their spouse as beneficiary of their retirement accounts. This allows the surviving spouse to “roll over” their deceased partner’s IRA or 401(k) into their own retirement account. This preserves the tax benefits until the surviving spouse must begin making withdrawals.

Do I Have to Leave My Retirement Account to My Spouse?

But what if you do not wish to name your spouse as beneficiary? In some cases that may not be possible. Federal law, which governs 401(k) plans and other employee-based retirement systems, automatically designates a surviving spouse as beneficiary. This can only be altered if the affected spouse signs a written waiver during the marriage.

In contrast, you are generally free to name anyone you choose as the beneficiary of an IRA. While the surviving spouse may benefit from the ability to roll over the account, there are many situations where it makes more sense to name another family member as beneficiary. An experienced Holland estate planning lawyer can answer any questions you may have about coordinating your retirement planning. Contact the Law Offices of David L. Carrier, P.C., if you would like to schedule an appointment today.

Losing a loved one is difficult under any circumstances, and it can be challenging to think about financial issues when you are coming to terms with the death emotionally. Yet it is important for families of veterans to know about burial veterans for benefits and some of the services they may be eligible for after losing a loved one. Even if the death is not service-related, the U.S. Department of Veterans Affairs still provides benefits for families of former service members provided that certain conditions are met. What else do you need to know about burial benefits for veterans and how this matter relates to estate planning in Michigan?

Simplification of Veterans’ Burial Benefits from the U.S. Department of Veterans Affairs

According to a news release from the U.S. Department of Veterans Affairs, changes to burial benefits went into effect in July 2014, and those changes were aimed at “simplify[ing] the program and pay[ing] eligible survivors more quickly.” With those new regulations, the VA was permitted to pay a flat rate for burial, plot, or interment allowances. In brief, the VA recently changed its regulations to make the process of obtaining burial benefits for veterans more streamlined.

To make clear the specific types of burial benefits for which veterans can be eligible, the VA provides a fact sheet that clarifies who is eligible and the amount that can be paid out.

Who is Eligible for Burial Benefits?

Typically, as the fact sheet explains, an eligible surviving spouse will be paid automatically when the VA is notified of a veteran’s death, and that eligible spouse will not need to submit a claim. Generally speaking, however, is a surviving spouse has not been paid automatically, then the first living person among the following that files a claim will be paid:

• Surviving spouse of the veteran;
• Survivor of a legal union with the veteran;
• Veteran’s child, whether minors or adults;
• urviving parent(s) of the veteran; or
• Executor/Administrator of the veteran’s estate.

Amount of VA Benefits for Veterans

The amount that the VA will pay in burial benefits for a veteran depends upon whether the death was a service-connected death or a non-service-connected death. First, we can explain the benefits for a service-connected death. What does service-connected mean? In brief, the death must have occurred during active military service. If the veteran’s death occurred on or after September 11, 2001, then the burial allowance from the VA is $2,000. For deaths that occurred before September 11, 2001, the burial allowance is $1,500. A survivor can also be eligible to receive some form of reimbursement for transporting the remains of the veteran if the veteran is buried in a VA national cemetery.

How much can the VA pay in burial benefits for a non-service-connected death? The answer to this question depends on a number of different factors, including the date of death and whether the veteran was receiving care from a VA hospital at the time of death. For veterans not hospitalized in a VA hospital at the time of death, the amount of the burial benefits depends largely on the date of death. The available benefits are as follows:

• If a death occurred on or after October 1, 2016, the VA burial allowance is $300, plus $749 for a burial plot;
• If the death occurred on or after October 1, 2015, but prior to October 1, 2016, the burial allowance is $300 and $747 for a burial plot; and
• If the veteran’s death happened on or after October 1, 2014, but prior to October 1, 2015, the burial allowance is $300 with an additional $745 for a plot.

If the non-service-connected death occurred while the veteran was hospitalized by the VA, then the burial allowances go up to the same amount as the plot allowance. As such, for a death that occurred on or after October 1, 2016, the VA will pay a burial allowance of $749, along with $749 for the plot.

Contact a Grand Rapids Estate Planning Lawyer

If you have questions about burial benefits for veterans, an experienced Portage probate lawyer can assist you. Contact the Law Offices of David L. Carrier, P.C. today.

For residents of Grand Rapids, Michigan who are thinking about estate planning and, in particular, are thinking about options concerning their pensions, it is important to understand how estate planning is connection to decisions about your pension. First, what is a pension? Is this something you need to add into your will? And can you have more than one beneficiary for your pension? These are some of the common questions we receive, and we will discuss these and more as we explain how pensions can figure into your estate planning.

What is a Pension?

In order to understand how your pension will play a role in your estate planning, you will first need to know what a pension is and how it functions. As CNN Money explains, a pension is simply a “retirement account that an employer maintains to give you a fixed payout when you retire.” A pension is what is known as a defined benefit plan. A defined benefit plan is simply one in which the benefit you received is based on how long you have worked for your employer and your salary. This is also a plan into which your employer pays the money (and makes decisions about where it will be invested).

How much is a pension worth and how does a pension get paid? The answers to those questions will depend upon a number of factors, including the length of time you worked for your employer, as well as your salary during your period of employment. A pension pays out when you decide to retire, and it will typically be paid either in a monthly payment over a period of time, or it can be paid in a lump-sum payment.

Learning More About Your Pension and Estate Planning

Now that you understand more about pensions (and, perhaps, how they are distinct from other types of retirement accounts such as IRAs, for example), it is important to learn more about designating beneficiaries and ensuring that your retirement benefits can help to provide for your loved ones.

A trusts and estates resource sheet from the American Bar Association helps to explain how you name beneficiaries on a pension plan, and other issues to consider. First, it is important to know that you do not name beneficiaries of your pension plan account in your will. While items that you bequeath in your will must go through the probate process, retirement benefits and other insurance payouts will not automatically have to go through the probate process. Now, how do you name a beneficiary on your pension plan if not through your will?

Pension plan accounts are a bit different than other retirement accounts when it comes to naming beneficiaries. While certain retirement accounts allow you to choose your beneficiary and to name that specific beneficiary in writing, pension plans require your spouse to be the named beneficiary—if you are married—unless the spouse expressly waives this benefit in writing. While in most cases your spouse will be the person you would choose as the beneficiary regardless, pension plans to assume that the spouse will benefit from this account in the event of your death. If you are not married, you can name anyone you choose as the beneficiary of your pension plan, and that person then may be able to receive lifetime payments through your pension.

A West Michigan Estate Planning Attorney Can Help

Whether you are married or not, it is important to discuss any estate-planning questions, including naming beneficiaries on your retirement accounts, with an experienced Grand Rapids estate planning attorney. An advocate at our firm can answer your questions today. Contact the Law Offices of David L. Carrier, P.C. to learn more about our services.

For business owners in Michigan, planning for their business’ future after their death is an important consideration. This article will consider what happens to a Michigan business after its owner’s death, the process of transferring a business, what happens when a business is not transferred to someone, and how an experienced estate planning attorney can aid throughout the process.

Transferring Ownership of a Business Upon Death

It is possible to transfer the ownership of a business to your heirs, or a trusted person or set of people, upon your death. One of the best ways to do this is to put your business in a trust. Transferring your business property to your living trust is a great idea, and is very simple to do (especially if your business is a sole proprietorship). If there are multiple owners, such as an LLC, you will need consent from other owners prior to putting your business interests into a trust.

You can also leave your business in a will, although items in a will do need to pass through probate, the process of which can be tedious and could tie up business operations.

What Happens When a Business is Not Planned for

When a business and its property and assets are not planned for and are not placed in a trust or named in a will, what will happen to the business depends upon the type of business structure. For example, a business that is formed as a sole proprietorship will simply become part of the owner’s (decedent’s) estate, and will be distributed to beneficiaries per the terms of a will or per state law. If a business is not solely owned, such as a corporation, the business will not die when the business owner dies. Instead, the owner’s estate becomes the owner of the decedent’s shares.

How an Experienced Grand Rapids Estate Planning Attorney Can Help

Each state has its own laws regarding property distribution upon death, and each type of business must be planned for differently. If you have any business interests in Michigan, it is best that you plan for what will become of these interests now while you are healthy and well; waiting too long could be catastrophic, and if you fail to create a plan at all, your business may be dissolved, and your heirs may be left with nothing.

At The Law Offices of David L. Carrier, P.C., we understand what it takes to protect your business and your loved ones. To schedule a free case consultation to learn about our business and estate planning legal services in Michigan, contact us online today. You can also call our offices directly.