Estate Planning: Prepare Your Finances for the Next Generation

Retirement. Many people often look forward to sitting on the beach and sipping mimosas. If you’re thinking about retirement, don’t wait on planning your estate. In fact, it’s something that you should be doing for a number of years before your retirement. Estate planning goes beyond managing your wealth; it ensures streamlining your assets and estate to be passed onto the next generation. This minimizes the amount of taxes you have to pay, and mitigates any legal complications from your estate. 

Estate planning involves the careful organization and management of your assets and affairs. This ensures that your wishes are followed when you pass away. Here are some critical documents that you should prepare for your estate plan: 

1. Wills and Trusts: Draft a Will to clarify how YOU want your assets and estate to be dispersed to your loved ones. 
2. Beneficiary Designations for policies: This includes retirement accounts, life insurance policies, and other policies to ensure that they go to the people whom you have chosen. There are certain beneficiary designations that fall outside of Wills.
3. Power of Attorney: This doesn’t refer to an actual attorney; this individual is someone who can make financial and legal decisions on your behalf if you become incapacitated.
4. Living Wills: Appoint a trusted individual to make medical decisions on your behalf. Again, this is if you become incapacitated.
5. Guardianship for Minor Children: Name a guardian to care for your minor children. This is usually done through your Last Will and Testament. 
6. Tax Planning: Minimize your tax implications. This is self-explanatory as to why you should to this. 

Estate Planning and Retirement Go Hand in Hand. These are interconnected in several ways: 

1. Asset Preservation: Effectively planning for your estate can help preserve your wealth during retirement. Minimize tax liabilities to streamline the estate transfer of your assets. This secures the financial future of your beneficiaries.
2. Retirement Income: Many retirees only on income secured from their assets, which includes retirement accounts and investments. 
3. Healthcare: Estate planning includes a Living Will. This can be crucial in retirement and beyond. Your wishes are respected if you become incapacitated (if you are in a coma, for instance).
4. Legacy Planning: Retirement is an ideal time to focus on creating a lasting legacy. You can leave a generous impact for various charities, your heirs, or whomever you like. 

Now that there is an established correlation between estate and retirement planning, there are at least seven tips make the whole process of planning your estate easier: 

1. Assess Your Current Financial Situation

Assessing your current financial situation means evaluating your assets, liabilities, and overall net worth. Take inventory of your retirement accounts, investments, real estate, and any valuable possessions, etc. Essentially, you will want do an entire stock of your estate and assets. 

2. Set Clear Financial Goals

This should be fairly obvious, but what are you planning for your retirement? That’s what your financial goals determine. Several factors determine this: the lifestyle you’re looking to maintain in your retirement, any charitable contributions you want to make, etc. Have clear objectives that guides your estate planning decisions.

3. Create or Update Your Will

It’s been mentioned several times, but a Will is obviously a document that is the foundation of estate planning. If you don’t already have one, you can draft a comprehensive Will, specifying how your assets should be distributed. If you have an existing Will, review and update it periodically, to ensure that it reflects your life circumstances. 

4. Trusts

Consider establishing trusts to protect and manage your assets. Trusts can help you achieve specific objectives, minimize estate taxes, provide for your minor children or grandchildren, and management of your assets.

5. Review Beneficiary Designations

Review and update your beneficiary designations for your retirement accounts, life insurance policies, and any other assets. Do these designations align with your wishes? 

6. Tax Implications

Estate taxes can significantly impact the value of your estate and the amount your heirs receive. You may decide to work a qualified tax advisor or estate planning attorney to develop strategies for minimizing estate taxes. You obviously want to be within legal standing of any tax laws. 

7. Communicate with Your Heirs

Open and honest communication with your heirs is crucial. Discussing your estate planning decisions with your heirs can help manage expectations. This also addresses any concerns or questions they may have. This will (hopefully) reduce any potential squabbles that may arise later on. 

8. Review and Update Your Estate Plan

This is a no-brainer: many people often try to create their Will or Power of Attorney the day before they’re about to embark on a trip. Life is dynamic, not static. Your financial situation may change over time. Your estate plan should be reviewed regularly, not updated on the fly. This is especially true when major life events take place in your life: marriage, divorce, the birth of children or grandchildren, etc.

Estate planning and retirement planning are inextricably linked, and both are critical components of securing your financial future. Carefully organize your assets, set clear financial goals, create or update your Will, establish trusts, review beneficiary designations, tax implications, communicate with your heirs, and regularly updating your estate plan. Whew! That sounds like a lot, but you don’t have to do everything right away. You can sit down, plan everything out, and go through each step. Estate planning isn’t just a one-time thing; it takes place over a number of years. Begin the process today.