Inheritance Planning: Qualified Retirement Accounts vs. Other Financial Vehicles

When it comes to inheritance planning, one of the most common questions I hear is: “Should I pass wealth through my retirement accounts, or are there better vehicles to consider?” The answer depends on your goals, your beneficiaries, and the tax implications involved. Let’s break it down.

✅ The Pros of Using Qualified Retirement Accounts

• Tax-Deferred Growth: Assets in IRAs and 401(k)s can grow tax-deferred during your lifetime.

• Ease of Transfer: Beneficiary designations allow assets to pass directly, avoiding probate.

• Flexibility for Spouses: Surviving spouses often have favorable rollover options.

⚠️ The Cons of Using Qualified Retirement Accounts

• Taxable Distributions: Non-spouse beneficiaries generally must withdraw funds within 10 years (per the SECURE Act), which can create significant tax burdens.

• Limited Control: You can’t always dictate how or when beneficiaries use the funds.

• Potential for Higher Taxes: Large inherited accounts may push beneficiaries into higher tax brackets.

🔄 Alternatives to Consider

• Life Insurance: Provides tax-free death benefits and more control over timing and use of funds.

• Trusts: Can help manage how and when assets are distributed, offering control and structure.

• Taxable Investment Accounts: Beneficiaries may benefit from a “step-up” in cost basis, potentially reducing capital gains taxes.

⚖️ The Bottom Line

There’s no one-size-fits-all solution. Qualified retirement accounts can be powerful tools, but they’re not always the most tax-efficient way to transfer wealth. A thoughtful inheritance plan often blends multiple vehicles to balance tax efficiency, control, and flexibility.

 📞 My Inheritance Plan

If you’d like to explore how inheritance planning fits into your overall financial strategy, let’s schedule a conversation. Together, we can review your accounts, goals, and family needs to create a plan that’s clear, compliant, and built for the future.

#InheritancePlanning #RetirementPlanning #WealthTransfer #FinancialEducation #LegacyPlanning #FinancialWellness

Investment advisory services offered through Redhawk Wealth Advisors, Inc., an SEC

Registered Investment Advisor. SEC Registration does not imply any level of skill or

understanding. Redhawk Wealth Advisors and Patten Financial Group are unaffiliated and

separate legal entities.