Don’t Forget About Estate and Legacy Planning in Retirement

According to recent studies, the “great wealth transfer” will have baby boomers transferring an estimated $30 trillion to their heirs by 2050. Estate planning is defined as the preparation of tasks that serve to manage an individual’s asset base in the event of their incapacitation or death. Whereas legacy planning is defined as a financial strategy that prepares a person to leave their assets to a loved one or next of kin after death. The last thing you want is for your hard-earned savings to go to the government when you pass, or to a family member that you didn’t want it to go to. And, all too often, survivors will have to repay debts and be burdened with bills instead of the inheritance that they deserve. In most cases it’s avoidable, so don’t forget about estate and legacy planning for your retirement.

As hard as it may be to think about a plan for when you pass, passing without a plan for the distribution of your assets is even harder to imagine. One of the first steps in estate planning is to name your executor, who will be the individual responsible for dealing with your will and estate after your death. Without a will, the fate of your assets is left up to the court room where the outcome may or may not be reflective of your wishes.  A will allows you to designate beneficiaries, dictate who you’d like to manager your affairs, and can help you to reduce or eliminate inheritance, estate, or income taxes for your heirs. You can help save your family from another hardship in what will likely be a difficult enough time by simply having a will and estate plan, and maintaining them.

When estate planning, don’t forget to look over the tax considerations. For example, do not transfer assets with gains from an older generation to a younger generation without tax and step-up basis considerations.  These rules vary state to state and can be very complex to decipher.  This is yet another reason why working with an advisor who has the resources to offer guidance on all of your income tax, estate tax, trust and legacy information is key. If you receive assets from a deceased person’s estate, step-up in basis can eliminate your federal income taxes when you sell an asset you were left.  It does not apply to inherited retirement accounts or annuities. Depending on whether you live in a common law state or a community property law state, the step up in basis rules are different.  Be sure to know which rules apply to you in order to maximize your benefit while minimizing taxes.

Ultimately, your trusted financial professional will be critical in helping you plan for the management of your investments, funding your income strategies for retirement, implementing plans to work toward other important goals, and developing a legacy strategy for your estate. So, enter the retirement game on the right foot and make sure that your estate and legacy plans are up to date. We help our clients have the difficult money conversations that truly matter to their, and their family’s financial future. Click here to request your complimentary, no obligation financial review. We’ll look at your entire financial picture, take all of your personal factors into account, and help you put together an actionable plan that incorporates your estate and legacy planning needs.