Almost half of Americans have no retirement plan and no idea how to plan for the “take it easy” years. As more of us live and work in this freelance gig economy, it is not easy to stay focused on making wise financial investments to benefit our future. 

The focus of estate planning is to make the healthiest personal and financial plan for yourself and for your heirs. Read on to learn about the different types of retirement plans and how to use the laws involved in estate planning to reap the most financial benefit.

Qualified Plans

401K Plans and Pension Plans are generally offered through your employer. As the employee, you define the amount you’d like to contribute and sometimes your employer will match the funds that you put in. Pension amounts that go into the account are determined by the employer.

Drawbacks to Qualified Plans:

  • The company is technically the owner of the account and you are a participant. 
  • Your choices are limited as to where the money comes from 

Benefits to Qualified Plans:

  • You can make higher yearly contributions than you can with an IRA retirement fund
  • Qualifying events such as disability can allow you to move your plan into an IRA


IRA’s are a different way to save for retirement. Unlike Qualified Plans for retirement, you own the account. In these plans, unlike Qualified Plans, you can also choose different mutual funds or other assets to fund the IRA and name your beneficiaries.

Roth IRA 

With this type of IRA, you can’t deduct your contribution from your taxes each year, but when you retire, the benefit money you pull out is non-taxable income. This is a crucial point as you think about your beneficiaries who may inherit this account. Roth IRA’s have yearly income limits that are applicable: Income Limit for Single Tax-payer is $137,000 and for Married Joint Filing Tax-payers it is $206,000

Traditional IRA

With this type of IRA, you deduct taxes from your contributions each year. However, your distribution as a retiree are taxed. The income limits on these IRA’s are higher and if you don’t qualify for a Roth IRA, this is the type of investment your financial planner will likely recommend.

Distribution Period

The contribution period is the time that you spend during your life contributing to your retirement plan. At the age of retirement, you enter into the distribution period when you begin to receive your retirement funds every month. If you have an IRA, these deposits are called required minimum asset distributions. If you are taking social security, your monthly retirement check is determined by your income level throughout your lifetime. If you have a pension plan or a 401K, they will begin to distribute also at retirement age. 

The Law Matters

The SECURE ACT was passed in 2020 and changes everything for estate planning. You may have built up a million dollar IRA that you wish to give to your children or grandchildren, but because of the new law, your beneficiaries can no longer stretch their payments over the course of their lifetime. 

Because of the SECURE Act, the entire IRA must be paid out to the beneficiary within a 10 year window.

Roth IRA Strategy

One of the advantages of the Roth IRA is that you have already paid your taxes on it. Roth IRA funds are tax-free during the distribution period. This means that payments to your beneficiary from an inherited Roth IRA can be withdrawn tax-free during the 10 year window, as long as you had the account opened for at least five years before you died.

If you are leaving an IRA to your spouse, they can roll the money over into their IRA so the 10 year pay out window does not apply.

Protection of Assets

Often in estate planning, you work to protect assets from taxes or other problems using a trust. A trust is a legal framework much like a business. A business makes money and manages its assets. If you create a business, you might hire an employee to manage the business. Your business has its own bank account and manages its own funds.

In the same way, a trust holds assets in a legal framework for your estate and also has a manager. Your manager is called the Trustee. You are called the Grantor. You, the Grantor, put assets into the trust to be managed by the Trustee. You can put in houses, property, digital assets, vehicles, bank accounts, and retirement funds.

You cannot put your IRA into a trust while you are living. However, you can name the trust as the beneficiary of your IRA. In the language of the trust, you also decide how the assets are distributed after your death.

Trusts Offer Protection

One way to protect your IRA funds from the taxes created by the new 10 year payout rule is to set up a trust. When you name your trust as the beneficiary of your IRA, the trust inherits the IRA when you die. While you are still alive, you receive your benefits. 

After you pass away, the trustee uses the rules of the trust to determine when and how much to pay out to beneficiaries. This trust framework helps minimize beneficiaries’ tax burden while also avoiding a lump sum payout that could be spent recklessly.

Other Benefits of Trusts

  • Eligibility for Medicaid (or other government programs that have an income cap)
  • Protect your Assets from Medicaid Recovery Program (or other creditors)
  • Protection from Estate Taxes (If you own more than $20,000 in assets in NC)

Charitable Remainder Trusts

According to the American Bar Association, “because a CRT is exempt from income tax, it can receive a lump payout of the IRA without current tax.” 

This means that you can use your traditional IRA to pay out taxable distributions over the course of your beneficiaries’ lifetime instead of having to face the 10 year payout window established by the SECURE Act of 2019. When your beneficiary dies, the rest of the money is given to the charity named in the trust.

Make a Plan

Estate planning is important for maximizing financial gains for your retirement years and beyond. Talk to your attorney about how to use the most recent laws to minimize the tax burden on your retirement funds. There are strategies that can maximize your retirement funds for both you and your heirs. Set up a time to speak with a knowledgeable estate planning attorney to understand the implications of the law more thoroughly and make your estate plan.

Learn More

To learn more about retirement and estate planning, check out our webinar replay. Kate Anders, an experienced Financial Advisor, and Adam Hopler, an attorney in Estate Planning and Litigation, discuss how to save and maximize benefits before and during your retirement years. Don’t miss out on optimizing your wealth and protecting your future.


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