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Understanding what happens to retirement funds after death

November 18, 2016

Estate Planning,

Firm News,

After a family member passes on, his or her property and assets are given to the spouse, children and other beneficiaries according to a will or trust, or otherwise divided by the court. Retirement funds are treated in much the same way in Michigan and other states.

According to the Internal Revenue Service, the retirement funds from an IRA, 401(k) or other retirement account can be treated as assets to benefit a spouse or children after the primary account holder’s death. There may be tax considerations and other rules, depending on how the funds are distributed and whether they are taken out early or left in a retirement account.

Can relatives be eligible to receive government retirement funds after a loved one’s death? The U.S. Social Security Administration states that there are several requirements that must be met for a spouse or children to receive Social Security retirement originally designated for the deceased. The surviving spouse may receive the benefits if he or she is 60 or older, or at least 50 years old and disabled. A younger spouse may receive benefits if he or she is caring for children under the age of 16, or for children who are disabled and receiving benefits. Children might also be eligible for the Social Security retirement benefits of a deceased parent if they are unmarried and under age 18; attending school full-time between the ages of 18 and 19; or older than 18 but severely disabled, as long as the disability started before age 22.

The rules regarding distribution of retirement funds to surviving family members can be complex, particularly when it comes to Social Security benefits. It is always advisable to become informed on the topic and to discuss questions with those qualified to provide answers.