This Article is designed to be of general interest. The specific techniques and information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser. For a more detailed version of this article see 1997 Changes Regarding Living Trusts as Retirement Plan Beneficiaries .
Retirement plans are some of the most difficult assets for which to optimize death planning.
Often they are extremely valuable but have unexpected tax consequences. Typically, retirement plans hold pre-income tax funds. Although it seems unfair to many people, at your death they are subject to both estate tax and income tax . On the other hand, some people have enough other funds that they can plan for future generations and maximize their gifts to their families. It is clear that for the maximum long-term benefit, delay of income taxation by postponing withdrawals as long as possible achieves the greatest growth, through tax deferred compounding.