Planning for the Recently Retired

Myth #1. My level of employment should have no impact on what happens after my death.
Because your paycheck from your job typically pays your bills, the lack of a paycheck will impact how much money and property you have during your retirement, unless you have inherited a large sum of money. Because you will live on the money from your retirement accounts and investments, there may be less left over to take care of your loved ones when you pass away than you have right now. This could put a damper on your wishes.

In addition, although you cannot take your money and property with you when you die, you can choose what happens to it at your death. Without a plan, your state’s law will determine what happens to your money and property. It will most likely go to your spouse (if you are married), your children, grandchildren, parents, siblings, or others—in that order—depending on who has survived you. The amount each person receives will also be determined by state law.

Myth #2. I plan to spend every cent before I die, so I do not need an estate plan.
While most people think of an estate plan as who you are leaving your money and property to, there are other important matters that can be handled using an estate plan. With a legally enforceable estate plan, you can choose a person to make financial and medical decisions for you, list who can have access to your medical information, and name guardians for your minor children.

Question #1. What makes retirement a good time to create an estate plan?
With retirement comes a new chapter in life. To make sure that you have enough money to survive, you have most likely inventoried everything you own and your sources of income. By doing this prep work, you have actually taken a large step forward in the estate planning process. Knowing what you own makes it easier to plan for the use and management of your
money and property during your lifetime and after your death. You can also plan for someone else to manage your money and property for you during your lifetime if you are unable to.

Question #2. What should I look for when I review my existing estate planning documents?
Having a properly executed and legally binding estate plan is a great first step in making sure that you and your loved ones are cared for. However, it is important to remember that estate planning is not a one-and-done event. You should review your plan every year or so, especially after major life events such as retirement. When looking at your existing plan, the following are some important questions to ask yourself.

  • Do you still own the same property or have the same account balances as when your plan was first created? What will the balances be at your death? Chances are you put money into investment or retirement accounts during your working years to prepare for this next chapter. While you may have a lot of money today, you need to be aware that the amount of money you have will decrease when you withdraw from those accounts.
  • Does your plan assume your children or other young beneficiaries are still minors? The birth of a child usually prompts parents to create an estate plan. However, once it has been drafted, many parents continue living their lives without thinking about their estate plan. If it has been some time since you created your estate plan, your once-minor child may now be an adult or approaching adulthood soon. Your focus may no longer be on choosing the right guardian but instead on making sure your adult child’s needs are properly addressed in your documents.
  • Does your plan rely on proceeds from an employer-provided life insurance policy? Many employers offer life insurance as part of an employment package. However, you may no longer have this policy when you stop working. If you were relying on these proceeds to provide for your loved ones at death, you will need to explore other options.
  • Do you want to change how much your beneficiaries inherit and how they receive their inheritance? Now that some time has passed, are the amounts of money and property and the ways in which they are to be distributed still appropriate? For example, did your will or trust provide that $300,000 be held in a trust for your only child’s benefit and then distributed to your child when they turned thirty-five? Is it now likely that you will have less than $300,000 at your death? If so, what other wishes will you have to sacrifice to give your child $300,000? Also, if your child is now thirty-five years old or older, any money and property will go to them automatically based on the provisions in your documents. Are you still okay with that? Now that your child is older and you have a better understanding of their needs and abilities, you may want to consider changing how they receive money and property. They may require more than you had originally planned, or perhaps they are successful enough that they no longer need to inherit from you.

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