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Expert Guide to a Golden Retirement: Learn Three Tips For Pain-Free Estate Planning

The average life expectancy for American adults today is 78 years old. Since retirement age typically begins around age 65 for many Americans, it has never been more important for you to plan for what will happen to your estate. Unfortunately, many people wait until it’s too late to start planning for their golden years, and many people still make mistakes along the way, or try to handle all of it themselves.

Many clients call our office when they need guidance on estate planning. Often, a death in the family has spurred this action and many people are unprepared for the unforeseen consequences of mishandled estates.

Don’t postpone Estate Planning – It benefits your loved ones!

Estate Planning essentially means identifying your assets and organizing their distribution in the event of your death. Your assets can include:

  • any property that you own,
  • vehicles in your name,
  • your checking or savings accounts, or
  • stocks and investments.

When you procrastinate on estate planning you leave your assets under the control of the state you live in, and out of the hands of those who are closest to you that can make better decisions for your estate. But just how can you make sure that the plan you put in place is working the way you want it to? Learn the three biggest elements of the estate planning process below. And if you think estate planning ends by simply making a will, you are in for a surprise.


1. Create A Will (or a trust in appropriate cases) and Update Beneficiary Designations

The first step in creating a foundation for your estate planning is to create a new will (in some cases a trust) or update an existing will. A will determines which family members will be named as beneficiaries and determines what assets they will receive upon, and how. It’s crucial to name exactly which beneficiaries receive what items, down to the small specifics including non-monetary assets like family heirlooms. A will can also determine who will obtain guardianship of any young children or grandchildren that are in your care.

A will also fives you the chance to name an Executor of the Estate who will carry out the wishes stated in a will. While you may choose a close relative for this job, you may also choose a professional advisor or executor in the form of an attorney to avoid any conflicts or estate disputes among beneficiaries.

Along with your will, you should also update any life insurance beneficiaries, retirement plan beneficiaries or any other contracts where you have designated a beneficiary. These beneficiaries are separate from a will, and any outdated information will not follow the beneficiaries listed on a will.

Considering the amount of legality intertwined into these documents, we recommend that you do not create a will or update beneficiary designations on your own. There is too much risk for items to fall through the cracks to not let an expert like an attorney handle this.


2. Determine Advanced Directives

The phrase “advanced directives” refers to your designation of medical decisions and/or financial decisions to be carried out should you become incapacitated or unable to make your own decisions. Advance directives come in two forms, including living wills and power of attorney.

  • Living Wills- This document will detail the medical treatments you wish to undergo, and those that you refuse to undergo should you become unable to communicate your wishes. To be sure that your medical wishes aren’t completely out of the hands of those closest to you, we recommend appointing a health care proxy who will make important medical decisions for you in the event that you cannot. A health care proxy is a separate document outside of a living will. Living wills only affect medical decisions.
  • Power of Attorney- Should you become unable to make sound, financial decisions regarding your estate, you can still have someone you know be financially in control through a Power of Attorney. This person can manage funds and bills, as well as make financial decisions in regards to your estate. A Power of Attorney does not have the ability to make medical decisions.


3. Implement Strategies That Reduce Estate Taxes

In order to minimize estate taxes, you can practice Lifetime Giving. Gradually gifting money to beneficiaries throughout your lifetime is more tax effective than leaving it to your heirs after you pass. Lifetime giving includes gifting an amount up to $14,000 within a given year, and up to $5.35 million over the course of your lifetime. This gift can also go straight to medical needs or educational purposes without incurring taxes.

Another way to minimize estate taxes and income taxes is to make a selected charity the beneficiary of any taxable, retirement assets you may have, and leave tax-free assets like permanent life insurance benefits to your beneficiaries instead. This will minimize the amount of taxes your direct relatives will need to pay.

Lastly, you can offset any taxes your estate incurs by purchasing a life insurance policy that will cover the amount of estate and income taxes. If you predict that your estate will accrue $100,000 in estate and income tax, the tax-free insurance policy in the same amount would be able to cover the $100,000 that the beneficiary would need to pay.

However, there are important considerations to consider with a life insurance policy, and improperly handling this, or trying to organize it on your own can cost your loved ones more – which is the opposite effect you want. Every case is unique, so you should speak with an elder law attorney who can help determine the correct approach for a life insurance policy in order to keep it tax free.

At the law office of Mulder and Freedman, we know that estate planning can seem daunting. But we also understand that it is crucial to start planning for your future today. Call our office today in order to get started with a helpful attorney with years of expertise in estate planning. Don’t wait until it’s too late.

Contact our office to schedule an appointment today: 713-721-5657.