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Planning Considerations
In light of the factors above, a Plan participant
should always consider the following:
The Beneficiary Designation Form Governs
Participants routinely (and wrongly) assume
that their wills govern the distribution of Plan assets. These
assets are distributable to the beneficiary named on the form,
or according to the default method in the Plan, regardless
of the provisions of the participant's will.
Always Name a DB, if Possible
As noted above, without a DB, the deferral
of withdrawals from a Plan by either the participant or the beneficiaries
may be severely limited or eliminated completely.
Review the Plan Periodically, and Always Just
Before the RBD
The beneficiary designation should be reviewed
at regular intervals, after a major life event such as divorce
or a death in the family, and within the year before the participant
reaches the RBD. The latter is particularly important, because
it allows the participant to ensure that he or she will make the
proper election regarding minimum distributions by the RBD.
Advanced Planning
If a participant has a large Plan balance or
a complicated estate plan that involves, for example, distributing
Plan assets to trusts for minor children or partially to charity
and partially to children, the participant should consider working
with an expert in this area to obtain the best tax planning advice.
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