Estate Planning for Retirees

Retirement brings many changes to your estate. For starters, your source of income will no longer be the same as when you were employed, and any shift in finances is always a cue to look back at your estate plan. If you’re soon-to-be retired, it’s recommended you follow these steps to update your estate plan.

Ensure You Have an Updated Will or Trust

Your will and trust are the guiding documents dictating where your assets go when you die. If you don’t have a will or trust or haven’t updated yours in years, the assets not outlined in your trust could be subject to probate court or could end up in the wrong hands. As you come upon retirement, ensure that your assets are going to the exact people you want by updating both documents to reflect your current wishes.

Understand Your Individual and Estate Tax Implications

Whether you have a Roth IRA or a 401k, both of these retirement accounts can take on different tax implications depending on if your contributions were taxed or if they were pre-tax dollars, how much and when you’re withdrawing and if your withdrawals will put you in a different tax bracket. To have a full understanding of the taxes on your personal retirement and overall plan, utilize an accountant to guide you through taxation on your income. Something else to keep in mind – if you name a trust as your retirement beneficiary, your trust beneficiaries may miss out on deferred taxes and could expect increased taxation, depending on the trust language. It’s important to work with an attorney to ensure that your trust is set up in such a way to save your family from paying accelerated taxes on their inheritance. These tax implications could be a determinant factor in whether or not you want to change your type of retirement account or reevaluate your trust.

Update All Account Beneficiaries

When setting up a retirement fund such as 401k or IRA, beneficiaries are named when setting up the account. This means that there’s a chance the beneficiaries on your respective retirement accounts and other assets could be decades old. These beneficiaries will be the recipients of the accounts, despite who you designate as beneficiaries in your will or trust.  When was the last time you updated them? If you can’t remember, retirement is a great milestone for you to reference back to your IRA and 401k plans (as well as all other assets) and update your beneficiaries in alignment with your estate plan.

Establish and Update Powers of Attorney

There are a couple of different things your powers of attorney can take care of in the event you are no longer able to, the first being a health care agent. A health care agent will be the person in charge of making medical decisions for you if you are unable to do so due to incapacity. You will also want to designate a financial power of attorney to manage your finances if you are unable to. There are a range of responsibilities your financial power of attorney can take on depending on your specifications. This is why it’s important to be specific with any requests you have and ensure that you fully trust the agents being designated under powers of attorney.

Updating your estate plan as your embark on retirement will be something your loved ones will thank you for and is something you can feel good about.