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estate planning ultimate guide to retirement

Estate Planning for Retirees

Estate Planning, Events

In our last blog post, we talked about why someone that is retired or nearing retired would want to write their wills. This time we are going to talk about what makes up a true, full estate plan. A complete estate plan includes more than just a will. It also may include a trust and it does include a health care directive, a financial power of attorney, and also requires you to update your beneficiary designations. So, what does that mean?

Will

Let’s start with what a will does. A will determines who gets your stuff when you pass away. It also appoints the person that is going to be in charge of distributing your property according to your wishes. For those that still have minor children, it also appoints a guardian for them. If you don’t have a will, the state does have one for you, but you and your heirs are at the mercy of a judge at that point. Not having a will is a good way to put undue stress on your loved ones after you’re gone.

Trust

A trust is often known as a living trust as well. The main purpose of a trust is to continue to control your assets while you are living, but also provide a vehicle to pass on your assets to your heirs without having to go through the probate process. A trust can potentially help avoid negative estate tax consequences. It avoids probate if structured properly and it provides a way of keeping your and your family’s finances private. It is likely less time consuming when administering the trust is potentially a less expensive way to distribute your assets.

Health Care Directive

A health care directive is simply a way to make sure that your medical needs are taken care of in the manner that you want them to be. You determine who will make medical decisions for you. You can lay out the exact methods of medical care that you want to be done or not done if necessary. Copies of these should be given to all of your doctors so they know what to do or who to turn to if something should happen to you.

Financial Power of Attorney

A Power of Attorney provides the ability for someone of your choice to make financial decisions for you when you are not able to make those decisions yourself. It allows your representative to pay your bills for you when you can’t so that you can get back to life as you knew it when you’re able to resume.

Beneficiary Designations

This isn’t a document that an attorney can write for you, but an appropriate estate plan will include a discussion about your designations. It is simply an activity that you must do. Each of your life insurance policies, financial accounts and retirement accounts have these. If titled correctly, you are able to protect them from the probate process and make sure that they will go to the right people or organizations.

Obviously, there is more to it than these simple explanations. We will be holding a seminar in Belle Plaine at the KingsPath Senior Living facility at 125 Commerce Dr W at 4:00 on October 24th. You can click below to get registered for them.

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estate planning ultimate guide to retirement

Retirees and the Need for Planning

Estate Planning, Events

In a recent survey completed by caring.com, 76% of the respondents said that having a will is important. That means of the 1,003 people that took the survey, roughly 750 of them found it important. That same survey told us that only 40%, or 400, of all the people surveyed actually have a will. Those that are either in retirement or are approaching retirement (those that are 55 years and older) are a bit better as approximately 60% of that age group have a will. While that is better, that’s still 40% of people aged 55 or older that don’t have a will and that is the group we will focus on for now.

The question is, if it’s so important to people, why aren’t they actually doing it. Knowing you need to do something and actually doing it are completely different things. First of all, it’s not easy to admit your mortality. We all know we are going to die some day, but how many of us think that would be tomorrow? But that can’t be the only reason. We all do scary things when we need to…that’s what millennials kids call “adulting”. No, there are other reasons and the survey also addressed this question. Some common answers were “I don’t know how” and “It’s too expensive” (each received 6% of the responses). Well, we wouldn’t expect you to know how and, yes, it can be expensive. Again, we pay for expensive things when it’s necessary. How many of us would not fix the roof on our house if it were leaking? That’s expensive, but it’s necessary. Another common response was that “I don’t have enough assets”. While it may be true that you don’t have “a lot” of assets, many times it’s not how much that matters to your heirs (likely your kids) but what you have. And trust us when we tell you we have seen people fight over things that are worthless in terms of monetary value, but mean a lot to them.

The MOST common answer with half of the respondents answering this way was “I just haven’t gotten around to it.” Frankly, this answer can be devastating to families.

Devastating to families? Is that maybe a little strong? We would argue that it’s not. First, there is a financial component. If you die without a will and/or trust, Fidelity Investments did a study that estimated that 2%-5% of your assets will be eaten up by the probate process. So, just using a simple and realistic example, we can see what that means.

  • $250,000 House
  • $300,000 Retirement Accounts
  • $40,000 Personal Property
  • $590,000 Total Estate

That means that the total cost of the probate process on a relatively small estate for someone that has worked and saved for 30+ years is between $11,000 and $29,000. That is not a small bill for your estate and it’s likely not why you spent all those years saving your money. So, financially, is it devastating? Maybe not devastating, but it certainly is a tough pill for your kids to swallow.

The bigger threat, though, is what it can do to families. People fight over silly things. We often tell people that writing their will is for their kids, it isn’t for them. Yes, the financial aspect can be a driver, but even more so, preventing fighting between siblings is even more important. We all have seen siblings that were the best of friends for their entire life that never talk to each other again after their parents die. It’s heart wrenching. Plainly stated, it can be prevented by writing a will in most cases. Again, you didn’t save that money just so your kids could fight over it when you’re gone and it’s certainly not what you would have wanted.

At  our seminar this month we will talk about strategies to avoid these possibilities. It will be held in Belle Plaine at Kingspath Retirement Living at 125 Commerce Dr. West at 4:00pm on October 24th. You are welcome to register here.

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