Where'd my inheritance go??

I learned something recently that everyone should know. When people are planning their estate (yes, you should PLAN!!), they often think charity and heirs are weighed the same in the eyes of the taxing government. This is not the case.

In your 401K or other retirement vehicle, you name your beneficiaries. If you list a person, the funds will be taxed twice: once as part of your final tax return and again as part of your estate. So, this money that you worked your ass off for will amount to less than 25% in the pockets of your heirs. See, the government approved these accounts as RETIREMENT accounts, not as vehicles for passing funds through to your kids. They figure that you're dead and can't use it anymore, so they may as well take it.

However, if you name a legitimate charity/nonprofit as the beneficiary of the retirement account, *all* taxes are avoided and the organization will receive everything. It's a much better deal than letting the government take the bulk of it.

The lesson is to name your favorite organizations as beneficiaries in your retirement accounts, and leave the rest of your estate (life insurance, savings, other investments) to your kids. A secondary lesson is to always use up your retirement money first, then dig into your other investments.

Please spread the word...