What’s the best gift you can leave your loved ones when your time comes? Drawing up your Will and other essential estate planning documents to make your wishes crystal clear. As you put together your estate plan, here are four strategies to consider when passing your assets to your beneficiaries.
1. The Thrift Savings Plan (TSP) & 401(k)s
The biggest advantage of these types of retirement accounts is that they continue to grow tax-free after your designated beneficiaries inherit them. Your beneficiary designation(s) should be updated regularly and must be on file at the time of your death. Without one, funds are usually distributed according to the standard order of precedence. Keep in mind that inheriting a TSP or a 401(k) can have tax ramifications for beneficiaries who make withdrawals without the guidance of a tax professional.
2. Home Sweet Home
If you’re like most Americans, your home is probably your most valuable asset. If you wish to pass it on to your kids, there are a few options to consider:
- A Transfer-On-Death (TOD) Deed: Much like a regular deed used to transfer real estate, it doesn’t take effect until your death and it bypasses probate court. Since some states don’t allow TODs, check to see if yours does.
- Bequeathing Your Home In A Will: If you go this route, the property may be tied up in probate court for a year or more.
- An Irrevocable Trust: When you put your home in an irrevocable trust that names your children as beneficiaries, you eliminate probate court.
“The death benefit is typically paid out tax-free to your beneficiaries when you pass away.”
3. Permanent Life Insurance
Whole Life and Universal Life are two basic types of Permanent Life Insurance to consider. Depending on how the policy is written, both may be eligible to earn dividends that increase the death benefit and cash value. The death benefit is typically paid out tax-free to your beneficiaries when you pass away.
4. Fixed Indexed Annuities
A Fixed Indexed Annuity (FIA) is an insurance product that establishes a contract between you and a private sector company that promises to provide you with guaranteed income for life. Most FIAs have a death benefit that allows unspent funds to be passed to your loved ones. When you purchase an FIA, your designated beneficiary will receive the remainder of your balance upon your death. Depending on how your contract is written, your beneficiary can receive a lump sum or continue receiving annuity payments.
To learn more, call an FRC® trained advisor who can put you in touch with a reputable estate planning professional.
