Getting A Good Start
Changes In Your Situation
Law Changes - Keep Up And Amend
Changing Plan To Keep Up
Keeping Your Plan After Retirement
Spending - Retirement Or A Rainy Day
Leaving It To Your Heirs

Keeping Your Plan After Retirement

One third of our clients are retired, and believe that keeping the retirement plan in retirement is useful. Quite often, a client will dissolve the corporation and adopt a sole proprietorship (Schedule C) to have a sponsor continuing for the retirement plan.

If you have a sufficient amount of money in the plan and want to protect the interest of your spouse and heirs, this is a valuable approach. Many clients view the fees they pay us for our services in retirement as being the amount needed to preserve their protection for spouses and heirs, and/or their continued use of asset classes not available in an IRA (or available at large expense).

  1. Value of assets in retirement plan
  2. Special needs
  3. Access to investments – asset classes
  4. Planning for life interest to spouse and balance to heirs

Value of assets in retirement plan:

  • if the value of assets in the retirement plan is over $500,000, then it is usually useful to retain the retirement plan

Special needs:

  • sometimes the nature of the plan or beneficiaries dictate that the retirement plan be maintained; for example, if there are multiple children as beneficiaries and someone to act as trustee and sponsor, the plan can be maintained and payments to the beneficiaries maintained by a trusted party, without incurring large fees
  • sometimes it is advisable to continue the retirement plan because of policies adopted by bankruptcy judges in the last few years, towards invading large rollover IRAs

Access to investments – asset classes: Investment Planning

  • income-producing real estate is a popular asset class; if you are the trustee, you can maintain a bank account for the retirement plan, put the real estate in the name of the retirement plan, and continue owning the property as long as you want
  • precious metals and collectibles are other asset classes that you can hold as a trustee; you can personally be a partner with your retirement plan in owning real estate
  •  as trustee of your retirement plan, you can diversify your investments across different asset classes, and to several investment managers
  • in an IRA, there is generally a lot of pressure to use only stocks and bonds for investments; also, if you hold real estate in an IRA, or an LLP interest, you can expect to pay significant fees each year IF you can find an IRA sponsor to hold the assets at all – as an example, a client advised us that the only IRA manager he could find willing to hold real estate charged 1.2% of the value of the asset each year, which was $6,500 per year

Planning for life interest to spouse and balance to heirs: Leaving It To Your Heirs

  • many situations will require that the surviving spouse be able to spend the entire retirement plan for his or her needs, following the death of the main participant
  • current laws allow one to leave a life interest to the surviving spouse for the retirement plan, with the balance going to the heirs after
  • your situation will likely start out in the “all to spouse” category, but later, say  if you have been retired for 15 years, and you and your spouse are say 75, and if other assets available are sufficient for your spouse, you and your spouse may want to change the plan provisions to a life estate -  please remember that under federal law, the spouse must agree in writing to any changes, so that you both would only make this life estate provision if there are plenty of other assets for your spouse to live on should you kick the bucket
  • there are significant tax benefits to the life estate; all income to the surviving kids and grandkids can be paid out over the life expectancy of the oldest beneficiary – this can be a much longer period than the otherwise applicable five-year period
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