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What Happens to Your Investment Assets When You Die?

What Happens to Your Investment Assets When You Die?

retirement account, estate planning attorney

The fate of retirement funds after death depends on the type of accounts held, whether designated beneficiaries exist, and the way accounts are set up. By making sure the right types of accounts are correctly set up and proper beneficiary designations are in place, people can ensure that their retirement money is available for surviving family members when they die.


Annuities are retirement benefits in which individuals pay a set amount over time (monthly, annually quarterly, etc.) and in exchange, receive a monthly benefit that pays out once the annuity is activated. The most substantial annuity is Social Security.

There are many kinds of annuities, but they generally fall into two classifications.

  1. Single Life annuities are paid out over the duration of the policyholder’s life. Once the policyholder dies, the payments cease. In general, these are cheaper options and payments to annuitants are larger.
  2. Joint and Survivor annuities pay out over the course of the policyholder and beneficiaries’ lives. These annuities survive the death of the testator but cease upon the death of the beneficiary. These accounts generally pay out less than single life annuities, but they provide more coverage for loved ones.

Retirement Accounts

401ks and IRAs

401ks and IRAs are traditional retirement accounts. Individuals should complete a beneficiary designation form for each account to name the people who will receive portions of the accounts. When a person dies, the beneficiaries can decide whether to keep the accounts, cash them in, roll them over, or decline to receive them. If these accounts are not properly set up and beneficiary designations maintained, the account funds can fall into the wrong hands when the account holder dies.

Brokerage Accounts

Brokerage accounts are another financial instrument that can be passed onto beneficiaries. The significant benefit for these accounts is that beneficiaries receive a “step up” basis on the stocks within the account.

For example, if parent purchases $1,000 stock in Disney for $1 a share (so 1,000 shares) and upon their death that account is worth $100,000, parent (if they sold the stock) would have to pay taxes on $990,000 for the increase in value (i.e., income). However, if the account is bequeathed to a beneficiary – then the child pays taxes as if they purchased the stock for $100,000 (i.e., they pay nothing in taxes if they sell the stocks immediately).

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