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Fields and Dennis LLP
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The "Rules of Retirement"

Retirement accounts are not what many people expected they would be in light of the global recession. What’s in them isn’t the only factor to consider, however; it’s important to understand who is entitled to your assets. According to New York State CPA, Ed Slott, retirement accounts and 401ks are “surrounded by a complex labyrinth of rules,” that make it very difficult to know who exactly they will be passed down to in the event of a death.

And according to Edwin Worrow III, a lawyer in Ohio, the “patchwork of federal and state laws governing these plans are partly to blame, even the best attorneys and accountants are bedeviled by it.”  There are, however, some basic rules that financial professionals usually follow in order to help families understand what happens to retirement accounts in the event of a death.

Rule number 1:  your spouse has priority; if he or she is the beneficiary on your account, he or she will inherit your retirement account regardless of anyone else included in the will.  Rule number 2: if you’re not married at the time of your death, your retirement account and 401k plan will be passed down to your designated beneficiary, regardless of non-contractual agreements. Rule number 3: IRAs, which are subject to state laws, can be passed to anyone you list as a beneficiary, with or without your spouse’s consent.  Finally, rule number 4: you do not need your spouse’s consent to cash out a 401k or roll it into an IRA if you change jobs or retire.