Estate Planning Blog

Thinking About Retirement? 7 Reasons You Need to Create or Update Your Estate Plan Now

Thinking About Retirement? 7 Reasons You Need

No matter how old or young you are now, you probably already have thoughts about retirement planning. This is especially true as we age and get closer to that magic number when we hope to stop working full-time and travel and enjoy our golden years instead. Certainly, financial planning is part of this conversation since you’ll need money to live on during retirement. But have you considered the need for an estate plan before retirement?

A well-thought-out estate plan is necessary for everyone, regardless of the size of your estate. Some estate plans can be very simple, but will “save the day” and protect you and your family if you are injured, sick or die. However, it’s also vitally important to think about what will happen to your assets during your retirement in addition to after you’re gone. Unfortunately, too many people forget the importance of a solid estate plan, or they may think that a will written online is sufficient. In most cases, however, families need to think more broadly about what will happen as they age and their lives change.

Here, we’ll cover seven reasons you need to create or update your estate plan now—before you enter your retirement years. 

  1. Plan for Your Future

While most people think of an estate plan as a vehicle for distributing their assets to the next generation after their death, it also protects you as you age. What if you get incapacitated or need to move into long-term care during retirement? A well-written estate plan includes an Advance Health Care Directive to ensure your medical wishes are followed if you cannot advocate for yourself. The newer version of this document includes HIPAA, so your agents and get confidential information about you and make decisions on your behalf. To allow for the management of your finances if you need help, a durable general power of attorney for finances is critical, even if you have a living trust.

  1. Distribute Assets

These are the primary reasons people create an estate plan: to disburse assets to family, loved ones, and charitable organizations. To avoid court, reduce taxes, and protect our heirs from their creditors, spouses, and even themselves. Without an estate plan—which often includes a trust, back-up will and powers of attorney—the state will determine where your assets go after you die after and lengthy and expensive legal process.

Even if you already have an estate plan in place, while you’re planning for retirement, it’s a smart idea to review your plan to ensure it still fits your needs. Perhaps you’ve remarried, your children are older, or you have grandchildren you’d like to include. Also, schedule regular reviews of your estate plan throughout your retirement years to keep it up to date, especially if anything in your life or family has changed.

  1. Minimize Taxes

One retirement planning goal is to reduce your tax burden during your retirement, as you live off the savings you’ve accrued while you were working. The same goal applies to estate planning. No one wants to leave assets that come with a huge tax bill. Working with an experienced estate planning attorney will help minimize taxes for your heirs. This is especially important if you have a large estate, where the tax burden can be substantial without proper planning. Planning for taxes on your IRA’s and other retirement accounts can be critical.

  1. Retain Generational Wealth

When planning to distribute your estate, one of the most important concerns of many parents is retaining generational wealth. Protecting your assets during your lifetime, including retirement, is important to ensure your estate is maintained for your dependents. You may benefit from creating a dynasty trust if you own a business or have a sizable estate. This type of trust is designed to protect your assets from litigation, creditors, and taxes from generation to generation.

  1. Give Back

In addition to leaving assets to family and loved ones after your death, many individuals also choose to bequeath part of their estate to charitable organizations. Without an estate plan, your family may not realize that you wanted to distribute some of your estate to philanthropic causes—and they honestly may not want to share. However, when you develop a plan that clearly states your wishes, that money will go where you want it to go. Plus, when you speak to your family about your plans for your estate, they’ll be aware of what to expect when you’re no longer around. There are also options on how best to leave a gift to charity, and how to structure the gift in your estate plan. One option can provide income and tax benefits to you while you are still alive, with the charity getting the gift when you are gone.

  1. Protect Minors or Children with Special Needs

While most people who are planning for retirement aren’t thinking about the physical care of their children and grandchildren, some may be. That could be because you started your family later in life and still have minor children at home, you may be caring for your minor grandchildren because their parents are unavailable or unable to do so, or you may have special needs adult children to consider. No matter the reason, an estate plan allows you to protect these children by designating a guardian/trustee and creating a trust that will support them as long as is needed.

  1. Prepare for the Future of Your Business

Many individuals who have a large estate can credit it to their business growth. Whether you built your business from the ground up, bought it after it was established, or inherited it from a previous generation, protecting that business after your death is important to the business itself as well as to your family. In your estate plan, you can determine how the business will be handled when you’re gone. Do you have a buy-sell agreement? Insurance for your business and key employees? Will you give it to a child? Allow your partners to buy you out and leave the assets to your heirs? Close it and distribute the assets? This is a huge component of a well-designed estate plan for business owners that, unfortunately, gets overlooked all too often when planning retirement and beyond. When businesses end up in probate, with all assets frozen, this often kills the business.

Are You Worried About Your Estate Plan or Trust?

Setting up a trust and estate plan is a potential minefield you don’t want to tackle alone.  Whether you have a plan in place now or need to start from the beginning, we can help. For more than 30 years, Joel A. Harris has protected the estates of families throughout California. If you want some help navigating the ins and outs of protecting your estate or establishing a trust to protect your future, feel free to visit us online, in person, or call us by phone at (925) 757-4605.

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