For many people, retirement may seem like a long ways away and death even further. While it may be many years until you retire or pass on, it is important to start planning for these occasions now. You can avoid a great deal of conflict and stress by doing your retirement and estate planning as soon as possible.
What is estate planning?
Estate planning is a broad— and to some— slightly daunting term. Despite what it may sound like, estate planning is simply the task of putting your affairs into order so that you can make things easier for your family members when the time comes. This process is not for you, but for your family. Estate planning covers a few key issues that are essential in understanding what it is and how to plan for it.
- Estate: Your estate is more than just your property. It includes all your assets: retirement accounts, insurance policies, pensions, everything you own, and everything you owe. A big part of an estate plan is deciding to whom you will distribute your assets upon your passing. The most popular estate planning tool is a will, but some people use living trusts. Living trusts can help you avoid probate, but they are very expensive to set up and in most cases unnecessary. Another way to pass on property without probate is to use transfer-on-death accounts or deeds. It is important to choose one of these processes to distribute your property according to your wishes. If you do not use your estate plan to do so, your property will be distributed according to your state’s intestate succession laws.
- Taxes: In recent decades, the policies regarding estate taxes have changed. Most people with average-size estates do not have to pay estate taxes. Federal estate taxes are only levied on estates that are worth well over $5 million. While most states do not require their own estate tax, there are a select few that collect estate and inheritance taxes on smaller estates.
- Minor Children: If you have young children, an estate plan is the perfect way to ensure that they are taken care of if you or the children’s other parent are not available. You can name a guardian to care for your children and a property manager to look after their property.
- Health Care: By creating a health care directive, you can plan for decisions about the health care you receive before you die. A health care directive includes a living will (details about what kind of health care you would like to receive in certain situations) and a power of attorney for healthcare (the person who will make decisions regarding your health when you cannot).
- Final Arrangements: An estate plan often includes instructions about what you would like done with your body after you die as well as what type of ceremony or memorial you would like. In many cases, you are allowed to appoint someone to make these decisions for you and leave detailed notes regarding your wishes.
How do you plan for retirement?
Retirement should be a stress-free time for you to relax and enjoy your life. The way to ensure a comfortable lifestyle in the future is to start planning now. Start by answering the following questions:
- What do I want my retirement to look like?
- How much money do I need to retire?
- How long will my retirement savings last?
- When can I afford to retire?
- How can I save money now?
- What should I do to prepare for retirement?
These questions are no easy and can be difficult to answer on you own. There are plenty of online resources that can help you find answers to these questions. Also consider meeting with a financial advisor whose sole job is to help you pass safely and comfortably into retirement. Begin planning now by learning more about your social security earnings and by creating a retirement plan.
Call our Arizona Estate Planning team at (480)467-4325 to discuss your case today.