Before moving into estate planning, an update on our transition into retirement, now in its fourth month. We’re past the halfway point of April and are still dealing with persistently ugly weather- lots of rain with most temperatures in the 30s/40s/50s, really cutting in on golf opportunities, also preventing us from getting our home landscaping in place. From the outside, the house still looks like it’s under construction without a yard. That leaves plenty of time for reading these days. On the plus side, we get to see our Granddaughter almost every day via Facetime, and I’m meeting our son in Atlanta this weekend for a couple of Braves games.
In a post last year, I jumped over the estate planning subject and went straight into the subject of trusts, promising to circle back into estate planning at a later date. Didn’t intend that to mean a year later. There are a number of good reasons to invest time reading up on estate planning and either taking a simple path, or a more complex path, to accomplish some planning steps. Assume for a moment that you and your spouse are going to live 25 – 30 years in retired life. In that time you’ll start Social Security (if you haven’t already), hit the starting age for Required Minimum Distributions (RMDs, discussed in an earlier post), your retirement nest egg will likely grow considerably- and you’ll want to minimize your annual tax bill as it does- your children will be moving towards retirement age, grandchildren will finish school and turn into adults, your travel opportunities will diminish, your medical needs will increase….then one day someone will be distributing your assets, hopefully to the people or organizations of your choice, and hopefully with a minimum going to the government via estate taxes. All these life events will have a progressive impact on your estate during and after your time here on this earth.
You and your spouse may already have a will, and that’s a good start. If you haven’t reviewed it in the last five years, you might want to do that, and look at least another five years in the future before making any updates. Most professionals involved in estate planning will also advise people to include a couple specific powers-of-attorney, a living will, and (a paper copy along with an electronic copy of) a list of your assets and debts. Your surviving family members and estate executor/administrator will be extremely grateful to you for having these done in your lifetime.
There are numerous easy-to-understand estate planning resources online and in book form. The following common sense considerations can be found among various sources, and is by no means a complete list. But it will get you going in the right direction:
- Make an inventory of your financial assets (including POCs, locations, phone numbers and account numbers) and tangible assets (jewelry, collections, watercraft, cars, tool sets, etc.). Don’t forget life insurance policies.
- Check your assigned beneficiaries for each financial account/policy to make sure the listed beneficiaries are still the individuals/organizations you want the assets to pass to.
- Make a list of all your debts (loan POCs, account numbers, phone numbers, etc.).
- Make a list of organization memberships you have (some include valuable benefits such as life insurance, etc.).
You may be very surprised to see what your net worth (total assets minus debts) adds up to. At this point, consider going to an estate planner certified in your state. This individual will know laws applicable to asset transfer situations and will be able to advise you on what options are available to minimize taxes- along the retirement journey as well as at life’s end- specify ways to ensure your desired asset transfer intentions are met, facilitate administrative processes on your estate in your lifetime (and your spouse’s), etc. This individual will also be able to help you execute any steps you choose to take, as well as help you select the right person to be your estate’s executor/administrator.
If you choose this individual to help you execute any of the estate planning steps you select (wills, trusts, Powers-of-Attorney, living wills, etc.), it will cost perhaps $500 – $5000, but will likely save so much more than that from going to the government or to pay legal bills stemming from the distribution of your estate.
If you’ve gotten this far and are still reading with interest, then you may want to spend some time looking at trust options. They can be extremely effective in saving taxes on your estate during asset transfers, as well as maintaining control of those transfer details long after you and your spouse have passed on. You don’t have to have assets in the millions of $$$ to benefit from using a trust. I’m still thinking through my options.
There are plenty more related considerations for estate planning which I’ve skipped, or haven’t thought of. Would enjoy hearing from you on these other considerations.