RJP Estate Planning

Baby Boomers Need to Remember Estate Planning with Their Retirement Planning

Many Baby Boomers are neglecting a key part of their retirement plans — creating an estate plan. And while death is not a pleasant thing to think about, death without an estate plan can create havoc for your surviving family members, financial planners warn.

USA Today recently published an article, titled “Big retirement mistake: Boomers with no estate plan,”that offers several tips for people who might be lagging behind in their retirement savings.

Failure to consider wills and estate planning is a frequent issue, and not just for Baby Boomers. People usually think that it’s something they can put off and deal with later. The article emphasizes that there are three very important things to think about when you start your estate planning (this week!):

1. Your property and financial assets;
2. Your children (if they are not adults); and
3. Medical decisions.

“Just because you are doing good retirement planning doesn't mean you are doing good estate planning, unless you address all three areas,” the article cautions, and sets out some important things to remember when you create your estate plan:

• Work with an established estate planning attorney to help you protect the safety of your financial plan.
• Get comfortable with the laws in your state, as each state has its own probate laws. Again an estate planning attorney is your best bet here.
• Update all of your beneficiaries. Retirement plan and life insurance beneficiaries don’t pass through your will.  These are totally separate and will pass based on your beneficiary designation.

Talk with an experienced estate planning attorney to review these points and others as you create your strategy for the future.

Reference: USA Today (April 8, 2015) “Big retirement mistake: Boomers with no estate plan”

Two Major Mistakes in Estate Planning

You're probably well aware of the need to orient your investments toward retirement, but you might be less aware of the need for an estate plan. "I think that on a list of things to do, it's at the bottom, if it even makes the list," Nicole Hart, director of trusts and estates at Sontag Advisory, a financial planning firm, tells USA Today retirement columnist Rodney Brooks.

When doing an estate plan, the article on newsmax.com, titled “USA Today: Don't Neglect Estate Plan as Part of Retirement Strategy,” offers some sound advice:

• Make sure an estate planning attorney examines every major financial document;
• Sign a healthcare proxy, living will and power of attorney; and
• Discuss all estate issues with your family, even if it’s uncomfortable

"Estate planning is intertwined with the financial plan," the article explained, and it’s no secret that many individuals fail to prepare for retirement. Those that do plan on their own make some major mistakes, and here are two:

1. Skimping on savings. The article cites a recent retirement survey in which about 50% of the near-retirees who were asked what they could have done to better prepare for retirement said they should have saved more. The more and earlier you start saving, the more your money can grow.
2. Overpaying for investments. The more you pay in investment fees, the less you have to benefit from compounding.

"The costliest errors are ones we make ourselves, often without realizing how much damage we're doing," the author notes.

Don’t make any major or minor mistakes when it comes to your future. Talk to an experienced estate planning attorney.

Reference: newsmax.com (April 10, 2015) “USA Today: Don't Neglect Estate Plan as Part of Retirement Strategy”

Special Concerns for Unmarried Couples

For unmarried couples, making a will is paramount, especially if they are sharing a home owned by just one member of the couple. If the homeowner dies without an estate plan, the other member of the couple could be out on the street. For partners who want to leave their homes to their children, one way to deal with this problem is to create a life estate for the surviving partner, says Austin Frye, a certified financial planner in Miami. This contract typically gives the survivor the right to live in the home until he or she dies or moves into a nursing home, at which time the house passes on to children or other heirs. In some cases, Frye says, the agreement will set aside money to cover maintenance and other expenses.

Although some couples remain unmarried to protect their estates, that strategy backfires if you end up paying estate taxes, according to a recent article in Kiplinger’s Personal Finance, titled “Retirement: Estate planning for unmarried couples.”However, if you’re married, you’re able to inherit an unlimited amount of assets from your spouse—without paying any state or federal estate taxes. In addition, you’re permitted to give an unlimited amount of assets to your spouse while you’re alive without filing a gift-tax return.

This exemption doesn’t extend to unmarried couples. Estates of up to $5.43 million are exempt from federal estate taxes. Some states, however, have lower thresholds for their estate or inheritance taxes.

The article explains that the tax code is also kinder to married couples as far as inherited IRAs. A spouse who inherits an IRA is allowed to roll the account into his or her own IRA, and a surviving spouse can delay taking required minimum distributions until age 70½. As he or she waits to take the RMD, the account will continue to grow tax-deferred. A spouses can also roll an inherited Roth IRA into their own Roth, and they’re not required to take RMDs.

Not so for unmarried partners.

An unmarried partner who is named as an IRA beneficiary can roll the account into an inherited IRA and take distributions based on his or her life expectancy.

Questions about estate taxes can be answered thoroughly by an experienced estate planning attorney. Talk to him or her to devise the best strategy for your specific situation.

Reference: Kiplinger’s Personal Finance (April 12, 2015) “Retirement: Estate planning for unmarried couples”