Understanding the intricacies of retirement accounts and probate is important when doing estate planning. In California, the question of whether retirement accounts need to go through probate is a common concern.
Probate is the legal process through which the court validates a will and ensures the distribution of a person’s assets according to the law. It can be time-consuming, prompting individuals to seek ways to minimize its impact.
Retirement accounts and beneficiary designations
One key factor that determines whether retirement accounts go through probate is the presence of beneficiary designations. Retirement accounts, such as 401(k)s and IRAs, allow account holders to designate beneficiaries to inherit the funds upon the account holder’s passing. The account typically bypasses probate, providing a more streamlined transfer of assets.
The importance of updated beneficiary designations
To ensure a seamless transition of retirement account assets, keep beneficiary designations up to date. Life events such as marriage, divorce or the birth of children may necessitate a review and adjustment of beneficiaries. Failure to update these designations can lead to unintended consequences, potentially resulting in the account being subject to probate.
When probate may arise
About 333,249 people die in California per year. While beneficiary designations often steer retirement accounts clear of probate, there are situations where probate may still come into play. If a retirement account lacks a beneficiary or if the beneficiaries are no longer alive, the account may be subject to probate. Additionally, if the account holder failed to comply with legal requirements, such as obtaining spousal consent for certain beneficiary designations, probate may become unavoidable.
As the saying goes, knowledge is power. In the realm of retirement planning, it is the key to a secure financial future
