Estate Planning When You Retire

Beneficiary designations are the silent operator of most retirement-age estates. They override your will. They override your trust. And they are usually full of stale entries: an ex, a parent who has passed, "my estate" because that is what the form said in 1998. Most people have not looked at them since the account was opened.

Print a list. Every IRA, 401(k), 403(b), TSP, annuity, life insurance policy, HSA, and TOD account. Confirm primary AND contingent beneficiaries on every one. Then make a real decision: spouse first, trust or children second, and per stirpes (down the family branches if a child predeceases you) where it fits.

For most married couples, naming each other as primary and the trust as contingent is the cleanest structure. For single retirees, or for retirees with adult children in second marriages, an IRA trust as primary may be the right answer. The pillar guide on naming a trust as your IRA beneficiary covers when that makes sense and when it does not: see "Should Your Trust Be the Beneficiary of Your IRA or 401(k)?".

One Arizona-specific detail most retirees do not know: A.R.S. section 14-2804 automatically revokes a former spouse's beneficiary designation on a non-ERISA Arizona account at divorce. That covers IRAs and most non-workplace accounts. It does NOT cover ERISA-governed workplace 401(k)s, which are controlled by federal law (Egelhoff v. Egelhoff). Re-confirm beneficiary forms after every divorce regardless, because the federal rule and the Arizona rule pull in different directions and the only safe answer is a fresh signed form on every account.

Done right, the forms do the work. One less thing to worry about.

Required minimum distributions from traditional IRAs and 401(k)s now begin at 73, rising to 75 in 2033 under SECURE 2.0. Roth IRAs do not require lifetime distributions for the original owner. Miss an RMD and the IRS levies a 25% excise tax, reduced to 10% if you correct it promptly. Most custodians will calculate and even auto-distribute, but the responsibility is yours.

Pre-RMD years (roughly 65 to 73) are the planning window most retirees underuse. Roth conversion strategy, partial harvesting from taxable accounts, and timing of Social Security all interact with what the RMD bracket will look like later. A short conversation with an attorney and a CPA in those years often pays for itself many times over.

After death, the SECURE Act forces most non-spouse beneficiaries to empty an inherited IRA within 10 years. For retirees leaving a six- or seven-figure IRA to adult children at peak earning years, that is a forced acceleration of taxable income. A "see-through" or conduit IRA trust does not change the 10-year rule. What it does is protect those distributions from creditors, ex-spouses, and a beneficiary's own choices in a hard year. For the right family, the protection is worth the structure.

Cross-reference: read "Should Your Trust Be the Beneficiary of Your IRA or 401(k)?" before naming any trust as a retirement-account beneficiary. The wrong language in the trust can collapse the 10-year rule into a 5-year rule and accelerate the tax bill.

About 70% of Americans turning 65 today will need some form of long-term services and supports. Medicare pays for very little of it. In Arizona, ALTCS (Arizona Long Term Care System) covers nursing-home and assisted-living costs for those who meet medical and financial eligibility. The applicant's countable assets generally must stay under $2,000. A community spouse may keep up to $157,920 in 2025 (the CSRA, set by CMS each year).

Arizona uses the federal 60-month look-back for asset transfers under 42 U.S.C. § 1396p. Gifts and uncompensated transfers in the five years before an ALTCS application can trigger a penalty period. That is why pre-planning options work best when set up at least five years before care is needed: long-term care insurance, hybrid life/LTC policies, and irrevocable Medicaid asset protection trusts. Crisis planning still works once care is needed, but the toolkit is narrower and the timeline is tight.

In practice: imagine a couple in Sun City where the husband is diagnosed with early-stage Parkinson's at 68. Talking with experienced estate planning counsel now lets them shift assets, fund a long-term care policy, and structure ownership before the 60-month clock matters. Wait until he needs assisted living at 73 and the same moves are blocked or carry a penalty period. Five years on the calendar is the difference.

A complete retiree document set in Arizona includes a financial power of attorney (durable, springing or immediate), a medical power of attorney, a mental health care power of attorney, a HIPAA authorization, a living will (advance directive), and for retirees with serious diagnoses, a Pre-hospital Medical Care Directive (the "orange form" under A.R.S. § 36-3251).

Re-sign the set every 5 to 7 years. Arizona law protects third parties who accept a valid POA, but in practice many banks, title companies, and brokerages quietly refuse anything older than that. A fresh signature avoids the fight at the worst possible moment.

Then have the conversation. A retirement-age plan is only as good as the person willing to step in when the hospital calls. Talk with your trustee, your healthcare agent, and your family before something happens, not after. If no family member is the right fit, Arizona has licensed professional fiduciaries who serve as agent, trustee, or personal representative. Done right, the right person is ready before you need them.

Most assets you hold at death get a step-up in basis. Your heirs inherit the asset at its fair market value on your date of death, not what you paid for it. That single rule can erase decades of capital-gains tax. It applies to most stocks, mutual funds, real estate, and the community-property half of a surviving spouse's assets in Arizona - actually, all of it under the full step-up rule for community property.

It does NOT apply to traditional IRAs, 401(k)s, or annuities. Those keep their tax character and pass to heirs with the income tax built in. That is one reason the order of spending in retirement matters: spending taxable accounts first and letting tax-deferred accounts grow is exactly backward for many families. Talk with experienced estate planning counsel and a CPA before drawing the spending-down playbook.