Retirement for Seniors

Pundamentals of Estate Planning | Retirement for Seniors
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Secrets of the Pro’s… Fundamentals of Estate Planning

One important chore that we face in retirement is putting our affairs in order such that our eventual heirs or beneficiaries can inherit our estates, as we intend, with a minimum of complication. Estate planning covers a broad range of specific issues that can mostly be arranged by preparing appropriate documents. Depending on the complexity of your estate, you may need an estate lawyer to help with document preparation and filing; for most people, however, online resources and software are sufficient to help you prepare these documents on your own, at minimal cost.

The Will

The basic document of an estate plan is the will, which specifies how you wish your assets to be distributed when you die. You can prepare your own will using software such as Quicken Willmaker, or through online forms available at or other reliable websites. Wills do not need to be complex, but they do need to be notarized, and once you have one, make sure that your designated executor knows where to find it — ideally, you should have a few copies safely stored away in logical places.

Dying Without a Will

Given how easy it is to prepare a will, it’s remarkable how many people never draft one. If you die without a will — in legalese, “dying intestate” — your state or province will then designate how your assets will be distributed. Generally, assets are split between any surviving spouse and children; if there is no spouse or no children, then different jurisdictions have different formulas for dividing assets among blood relatives. In the absence of blood relatives, your assets will be absorbed by your state or provincial treasury. Needless to say, most people would not want their estates to pass on as a supplemental tax payment — so, if you don’t have a will, prepare one now!

Estate Planning

Estate Planning

After You Die What Effect Does a Will Have on the Process

Once you die, your will will need to go through probate, which is the legal process, done in probate court, of transferring your assets to your beneficiaries. Small estates can often avoid formal probate, especially if your assets can pass to beneficiaries via joint tenancy arrangements — whereby you and your spouse, for instance, jointly own your bank accounts and other financial accounts. On your death, your spouse automatically becomes sole owner. Or, many accounts that you hold individually — an Individual Retirement Account (IRA), for instance — will automatically pass on to a beneficiary whom you will have already designated and whose name is filed with the financial institution holding the IRA.

Costs of Probate

For most people, it’s smart to try to avoid probate. The procedure is time consuming and costly. Probating a will can entail court fees, personal representative fees, attorney’s fees, accounting fees, appraisal fees, and more. These fees are all paid out of your estate, and it’s not uncommon for probate fees to swallow up to 8 percent of the total value of your estate. One common method for avoiding probate entirely is to prepare a revocable living trust, and transfer all your assets into that trust. The trust document then does the work of the will — specifying how the trust’s assets are to be distributed once you die — without your executor having to set foot in a probate court.

Revocable Living Trust

If you prepare a revocable living trust, then you are both the grantor of the trust as well as the beneficiary — presumably, you will continue to benefit from the assets placed in the trust for the remainder of your life. Your heirs are listed in the trust document as secondary beneficiaries. Trust documents are complicated to set up; they must be done correctly, and you will need to hire an estate attorney to help you. You will also need to transfer all of your assets to the trust — bank accounts, other financial accounts, stocks, bonds, any deeded property, and the like. You’ll also still need to prepare a will, which will merely have language pointing to the trust as the document that specifies beneficiaries. This kind of will, called a “pour-over” will, also enables you to “catch” any assets not specifically mentioned in or held by the trust and distribute them according to the terms of the trust.

Other Documents-Financial Power of Attorney and a Health Care Power of Attorney

There are various other documents that you can prepare yourself, using software or online forms, specifying who should manage your affairs should you become incapacitated. A financial power of attorney grants a designee the power to manage your financial affairs should you become incapacitated; depending on how the document is drafted, a doctor may have to certify that you are “incapacitated” before your designee can start acting on your behalf. Your designee will then have access to your bank accounts to pay your bills, pay your taxes, collect benefits, invest your assets, manage your retirement accounts, and more; you can give blanket authority, or specify certain tasks only. The designee is required to act in your best interest; you should always name an alternate, in case your first choice is unable to act on your behalf for whatever reason.

A health care power of attorney is a document specifying who can make medical decisions on your behalf, should you become incapacitated. Choose your designee, and a backup, very carefully — ensure that the designee is aware of your own preferences regarding end-of-life situations and is willing and able to follow your preferences in what will likely be emotionally stressful circumstances. Your designee should be cool headed and rational.

Living Will- Advance Health-Care Directive

Finally, you should prepare a living will, sometimes called an advance health-care directive. This document specifies the kind of care you want, or don’t want, should you become incapacitated. Living wills are commonly used to refuse life-prolonging medical care in end-of-life situations. Again, you can specify certain procedures or simply make a blanket statement that you don’t want any such procedures administered.

Apart from a revocable living trust, you can prepare all of these documents yourself. Be sure to get them notarized, and let your designees and executors know where you’ve stored copies. Some states and provinces may have different requirements regarding language and format, so if you’re downloading forms, be sure they are applicable to your jurisdiction. If you split time between Connecticut and Arizona, for instance, you may need to prepare two sets of documents, one for each state.

Once you’ve prepared these documents and filed them away safely, your eventual heirs will have a much easier time coping with your inevitable demise. They’ll be having a hard enough time emotionally; at least make the logistics easy for them.

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