What Happens to Pension When You Die?

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When a person with a pension dies, the pension becomes an asset that is sold for cash value and distributed to beneficiaries. Understand that pensions will be subject to different taxes with the pension-holder dies with information from a financial consultant in this free video on money management and personal finance.

Part of the Video Series: Money Management & Personal Finance
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Video Transcript

Are you concerned with estate planning and beginning to think about what will happen to your pension plan if you were to pass away? Hi, this is Roger Groh of Groh Asset Management. Today, we're here to talk about pension plans and, specifically, what happens to them at the time of death. Well, in the end, they just become another asset. The question is going to be: What's the value of that asset? Because, in many cases, within pension and profit-sharing plans, the assets are not readily marketable, meaning you might have to debate with the Internal Revenue Service exactly what the value of those investments are. And you might very well have to debate on an after-tax basis what that means to your estate. Now, remember, there are two steps once you've died in a pension plan. One is that money has to come out of the plan. When it does, it's going to be taxed. The second step is once that money has come out is it has to be distributed to the beneficiaries under the will and is going to be subject to estate tax. So in the end, they'll get what you've left them, but there are those two steps that have to happen along the way. One thing to consider: To the degree that you can value those assets at the lower end of the legal valuation ranges, you're better off. The reason is you'll pay less tax all the way through. I hope that helped quite a bit. I'm Roger Groh with Groh Asset, and thank you very much for spending time with me.


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