SHEARWATER CAPITAL

Beneficiaries

Choosing the right beneficiaries is an important but often overlooked part of financial planning. The rules differ depending on whether you are designating beneficiaries for taxable accounts or retirement accounts, and your decisions can have significant tax and estate planning implications.

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For taxable accounts, heirs generally receive a “step-up” in cost basis at death, which can eliminate embedded capital gains and reduce their tax liability. For retirement accounts, beneficiaries may be required to withdraw funds over a set period, potentially accelerating their taxable income. Careful beneficiary selection helps ensure these assets are transferred in the most tax-efficient way possible.

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In some cases, naming a trust as beneficiary provides additional control, helping to protect assets for children, manage distributions over time, or address unique family circumstances. However, there are some situations in which naming a person as the beneficiary (such as a spouse or child) is preferable to a trust. We’ll help you understand your options and guide you toward the approach that best protects your family and your wishes.

We help physicians review and update beneficiary designations as part of a coordinated estate and tax strategy, ensuring that your wealth is transferred according to your wishes while minimizing the tax burden for your loved ones.