Estate Planning for Retirees

Estate planning is one of those areas in retirement that my opinion is probably the most overlooked areas, but probably one of those most important things to be considering. And as we start to move into retirement, it’s really worth revisiting some of these documents that we have in place. So there’s really five main types of estate planning documents that we’ll want to go through. So starting with our Powers of Attorney. So there’s two types. We have financial and we have health care. We have Wills, Lady Bird Deeds and then our Trusts. So I’m going to go a little bit deeper into each of those. So starting with our Powers of Attorney. These are really where we’re allowing people to make our financial and medical decisions, if we’re in a position where we’re not able to, such as like in a coma. What’s important though is as we get older, we need to be reviewing who we put in charge of these different areas. So as an example, when I set my health care Power of Attorney up a few years ago, I named my brother. You know we’ve had a 34 year relationship together. I thought, he’s probably the best person to be able to make those decisions objectively, knowing my values, beliefs and those sorts of things. However, since I put those in place, he’s since relocated out to the east coast. So when I think about you know, is he still the best person to be making decisions around you know my health care, if I’m in a position where I can’t, when he’s states away. So we want to be revisiting some of these different documents. Make sure the people we have named there are still appropriate. Wills are a great thing that we have when we’re younger to name guardianship for our kids. But as we get older, we want to think about you know, is a Will still enough? A Will in my opinion is just a ticket to probate court. It doesn’t avoid that probate process. It makes the process certainly easier for our heirs, but with that, it’s still contestable and it’s still a public hearing. So again, if we have a Will in place, it’s a great starting point. But we want to be thinking about is that still enough with our current goals and values and those sorts of things. Lady Bird Deeds are a document that really have become a lot more popular over the years. A very useful tool when we’re thinking about Medicaid spend down rules for long-term care type scenarios. So if that’s something you have in place, you know making sure that’s still up to date with current laws or depending around concerns with long-term care, you may want to revisit and see if that’s a document you should have in place. And lastly, Trusts. Trusts are one of the areas that I think get a bad reputation. We often think they’re only just for these high net worth or ultra high net worth families. That couldn’t be further from the truth. When we look at Trusts, there’s tons of different types of Trusts out there. When I think about a Trust though, the key is that we often think when we pass away our financial life ends. A Trust allows our financial life to continue past our death. It allows us to have a lot of control over our assets and a lot of protection. So if we have young heirs as an example and we’re concerned that maybe they might be going through a divorce down the road or it could be subject to some sort of litigation or lawsuit. A Trust will allow us to protect those assets. It also allows us to name specific language around distributions. It’s a lot different when you inherit money versus when you build it. There’s an emotional attachment that comes with that. A Trust might be important for you if you’re concerned with kids inheriting a large chunk of money and going out and buying a Ferrari when the turn 18, as an example. You can set up a specific plan as far as how these assets get passed on. So these are the main types of documents you want to be looking at. But as with anything, you want to be focusing on kind of the bigger picture plan. So we want to look at that documents, but also what can you be doing today proactively to help from an estate planning prospective? So looking at things like life insurance or long-term care. We’ve talked about this in past episodes. You get a lot of leverage. You get a lot of protection. It can offer a lot of liquidity between how these different things are set up. Depending upon what we’re trying to do though, that might gage us in a different direction in how we set up those estate planning documents. As an example, if we’re concerned with potentially state tax laws changing down the road and we want to remove money from our estate, you might set up something called an ILIT. An Irrevocable Life Insurance Trust. So if we’re going down that road, these two things are working together. We want to make sure they’re set up in conjunction with each other. Looking at things like Roth conversions. Great estate planning tactic to help reduce the tax burden to heirs, also thinking about gifting versus maybe doing QCDs to help minimize that tax burden again. Not only to us, but also to our heirs down the road. Also thinking about like Social Security and Pension elections. You know these are irrevocable decisions depending on how we set these up have a direct impact to our heirs. And that can of course then build into life insurance, long-term care, all these other things. So when you’re starting to do these planning techniques, as you pull on one string, it certainly affects something on the other side. So you want to start with the plan and then as we’re working through these different areas, we’ll start to build into some of these other estate planning documents. But as a whole, as you get prepared for retirement, move into retirement, you want to be working on a plan. And then from that plan want to start to visit these different estate planning documents and make sure that everything is set up in place and working in one cohesive plan together.