Efficiently obtaining your property to the successor of final decision takes a little know-how and attention. In most cases, pension benefits along with other qualified plans go to their selected beneficiaries immediately at your death; they do not have to be probated. But you've got to be on the ball about who's chosen as a successor and where.
Assume you write down a will where you assign your beneficiaries for your assets. Have you taken care of them? Not really in case your pension benefits are a significant advantage and you never assigned a beneficiary in your pension plan document. It's the plan document that guidelines, not your will or living trust.
Case one: missing beneficiary designation in your pension benefits
Once you die, your property becomes the 'first' beneficiary of your 'missing beneficiary' pension benefits. Sadly, that defeats most of the tax-sheltering advantages the pensions may afford the successor. Your strategy suffers two adverse circumstances:
1.Your pension plan assets must go through probate and be subject to estate taxes. After which
2.Your own beneficiaries (not including your spouse) should distribute your pension benefits or other certified programs within five years of your death.
The initial circumstance can tie up use of your pension benefits in the probate procedure and add fees. If your property is sufficiently large, estate taxes can rob some if its assets.
The second forces distribution of your pension benefits at ordinary revenue tax rates to your non-spouse beneficiary. This prevents the tax-sheltering of its growth over the 'stretch years' according to the beneficiary's remaining life-span.
Situation 2: A non-updated Beneficiary in your pension plan
You have pensions you originally allocated to a successor who no more is your choice. If you have married and do not change your beneficiary naming, then the initial successor will inherit your pension benefits.
Situation three: A non-authorized change in beneficiary on your pension plan
If your spouse is assigned as successor of your pension benefits, you can't change to a new successor without her permission. She should sign a written waiver.
Are all of your successor designations on your pension plans, certified plans and IRAs consistent with your current wishes? Here's a method to make sure you do not get messed up having the assets get less-than-optimal treatment.
If you have a number of plans, you can set up a special trust to be successor of all your tax-sheltered assets. Then, when your life situation modifications (marriage, divorce, new kids, grandkids, etc), you only have to adjust the one document, the trust. At death, all your pension benefits and other retirement plan resources will 'pour' into the trust and then get distributed as you have stipulated there.
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