Does Your Bumper Sticker Read ‘We’re Spending Our Children’s Inheritance’?

Once you get to retirement, it’s important to identify what your goals are for your nest egg. Do you intend to spend it down enjoying your golden years, pursuing passions and activities that bring you and your spouse joy, or do you want to leave an inheritance to loved ones? The question is posed in the article “Will You Spend Your Retirement Savings or Leave It Behind? The Answer May Surprise You,” from the Warwick Advertiser.

For many people, the goal of retirement is to do all the things that had to be put off while working. That might include a hobby that requires time and resources, travelling, purchasing a vacation home, or fulfilling a dream of going back to school. If that’s your retirement dream, bear in mind that these dreams all come with costs. Spending in the early stages of retirement often goes up, as retirees are still healthy enough to do everything on their bucket lists.

Given the reality of longer life expectancies, it’s important for retirees to understand that they may be living from their retirement investments for three or more decades. That means that you’ll need to have enough money to cover routine expenses plus health care and most likely, long-term health care services. Make sure your financial planning takes these factors into account.

Once you know how much money you’ll need for your costs of living and health care, plus inflation, then what’s left behind is your retirement fun money.

Knowing how to work within the constraints of a budget, is actually more important during retirement. You can’t just go back to work for a few decades, if you find yourself running short. You still may need to pick up a part-time gig on the side. However, that income is quite lower than a full-time position at the peak of your earning career.

What if leaving a legacy is more important to you than buying a second home? Just like the plan for retirement fun, you’ll need to do some financial planning to make this goal come to fruition. Remember that your legacy will include whatever is left at the time of your death, as well as what you may give while you are living.

Giving your children or grandchildren their inheritance while you are alive, is a way to enjoy the gift twice — once when you give and a second time when you see what they do with your gift. You might want to help the family reach their own financial milestone, like covering the cost of a college degree, helping with a deposit on a home or helping to pay off a mortgage.

Charitable giving may also be part of your legacy. If there is a charity, foundation, or alma mater that aligns with your values, you may choose to set aside a portion of your estate for a donation.

Regardless of whether you are planning on spending everything, giving away your assets to family members, or to a preferred charity, an estate plan is necessary to ensure that your wishes will be followed.

Your estate plan needs to include written instructions on how you want your assets to be distributed. That usually happens through a will, and trusts are often part of an estate plan. Make sure that you know what your beneficiary designations are—these are the people who are named in your insurance policies, investment accounts, IRAs, 401(k), or other retirement accounts. They will receive the assets as noted in the beneficiary designations, regardless of what your will says.

Reference: Warwick Advertiser (April 18, 2019) “Will You Spend Your Retirement Savings or Leave It Behind? The Answer May Surprise You”

 

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Estate Planning for Parents with Young Children

Attorneys who focus their practices on estate planning, know that not every story has a happy ending. For some of them, it’s a professional mission to make sure that young parents are prepared for the unthinkable, says KTVO in the article “Family 411: Thinking about estate planning while your kids are young.”

It’s a very easy thing to forget, because it’s so unpleasant to consider. The idea of becoming seriously ill or even dying while your children are young, is every parent’s worst fear. But putting off having an estate plan with a will that prepares for this possibility is so important. Doing it will provide peace of mind, and a road forward for those who survive you, if your worst fears were to come true.

Start with a will. In a will, you’ll name a guardian, the person who would be in charge of rearing your children and have physical custody of them. Don’t assume that your parents will take over, or that your husband’s parents will. What if both sets of parents want to be the custodians? The last thing you want is for your in-laws and parents to end up in a court battle over custody of your children.

Another important document: a trust. You should have life insurance that will be the source for paying for the children’s education, including college, summer camps, after-school activities and their overall cost of living. In addition, proceeds from a life insurance policy cannot be given to a minor.

However, what if your son or daughter turned 18 and were suddenly awarded $500,000? At that age, would they know how to handle such a large sum of money? Many adults don’t. A trust allows you to give clear directions regarding how old the child must be, before receiving a set amount of money. You can also stipulate that the child must complete college before receiving funds or reach certain milestones.

An estate plan with young children in mind, must have a Power of Attorney for financial decisions and one for medical decisions. That allows a named person to make important financial and medical decisions on behalf of the child. You may not want to have their legal guardian in charge of their finances; by dividing up the responsibilities, a checks and balances system is set into place.

However, for medical decisions, it is best to have one primary person named. In that way, any care decisions in an emergency can be made swiftly.

While you are creating an estate plan with your children in mind, make sure your estate plan has the same documents for you and your spouse: Power of Attorney, medical Power of Attorney, a HIPAA release form and a living will.

Speak with a local estate planning attorney who has experience in planning for young families.

Reference: KTVO.com (Feb. 6, 2019) “Family 411: Thinking about estate planning while your kids are young”

Suggested Key Terms: Estate Plan, Minors, Guardian, Power of Attorney, Medical Power of Attorney, Beneficiary

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