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Does a retirement account have to go through probate?

On Behalf of | Dec 14, 2022 | Probate Litigation |

Probate is a process all California estates go through even if the decedent lacked a will. However, some assets are transferred outside of probate. Retirement accounts are among them.

Understanding probate

The probate process allows a person’s will to be validated so that assets are accounted for in preparation to pass them on to their heirs. Although a last will and testament can make this process faster, it doesn’t bypass it. If a person dies without a will, it can lead to a long, tedious probate period.

Certain assets must go through probate, but others can avoid it. Depending on the circumstances of a person’s estate planning efforts, their retirement account may or may not go through the process.

Protecting retirement accounts from probate

Whether your retirement account is a 401(k) or IRA, you can protect it from probate by naming a beneficiary to inherit the funds after you’re no longer around. If you’re married, you must choose your spouse unless they sign a waiver. It’s wise to name a contingent beneficiary as well in the event that your preferred one passes away before you.

Avoid naming a minor child to inherit your retirement account. If you pass away while they’re still young, they won’t get the money until they reach adulthood, which means the assets will go through probate. If you do choose to name a minor child, however, you can protect your retirement account by placing it into a living trust for their benefit.

Never name your trust as the primary beneficiary of your retirement account. Doing that would require minimum payments on it and it could lose tax-deferred growth. You want things to be as seamless as possible when handing down assets from your retirement account to a loved one.