Where Do Your 401(k) Assets and IRA Assets Go When You Pass Away - Nashville Tennessee Estate Planning Attorney


As an estate planning attorney, I am routinely asked, and troubled by the question that I receive from many Tennessee Families:

"I Have Beneficiary Designations On My Financial Accounts, So I Don't Need Any Estate Planning."

This couldn't be any further from the truth and is one of the common misconceptions when it comes to estate planning. First, 100% yes, financial accounts with properly completed beneficiary designations will avoid probate and pass to the designated heir in your beneficiary designation. However, a beneficiary designation may not always work as you intended.

First, if the beneficiary predeceases you and your forget to update the form, then the financial account will go through probate as a dead person cannot inherit assets.

Second, if the beneficiary you listed is under the age of 18, then the asset will go through probate. Under the Uniform Transfers to Minors Act, a minor cannot inherit assets directly and a guardian will need to be appointed to take control of the assets until that minor child reaches the age of majority.

Finally, having beneficiary designations on your financial accounts will not help the beneficiary should the beneficiary later have a divorce, have creditor claims, file for bankruptcy, be sued, or even have tax debt. Having a beneficiary designation on the financial account will not protect that heir's inheritance from all the various creditor claims.

During my Family Wealth Transfer Meetings with many of my clients we discuss and insist that our clients properly complete beneficiary designations for all of their accounts. However, we also counsel our clients that perhaps protecting that inheritance in a Trust for the benefit of their adult children may be the more appropriate strategy to provide their adult children with the highest level of asset protection from divorce, creditors, lawsuits, and other predators. 

If you have questions regardings estate planning with your retirement accounts and protecting your children's inheritance, then I encourage you to download one of our Free Books on estate planning to the left of the screen. If you are ready to schedule your Family Wealth Transfer Meeting, please contact our office at (615) 472-2482.

As always, we are here to help!

Daniel A. Perry
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Focused on helping seniors, individuals with disabilities and small business owners make informed decisions.
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