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Retirement and Estate Plans: Everything You Need to Know
Emily Shoemake

By: Emily Shoemake on August 13th, 2020

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Retirement and Estate Plans: Everything You Need to Know

Finance & Planning

Planning for retirement can't begin soon enough. In fact, any good professional financial advisor will strongly recommend having enough social security, pension and investment income to remain financially afloat for at least 20 years following retirement.

In addition, a health crisis could strike any one of us at any time in our lives, even if we have been given a clean bill of health by our physician. With medical costs at an all-time high, soon-to-be retirees cannot afford to neglect pursuing retirement planning strategies that provide reliable and ample returns on investments. Even with company insurance and Medicare helping to pay medical bills, one week in a hospital could possibly wipe out everything a senior has worked for all their lives.

Estate plans and wills are also vital components of a solid retirement plan. A misconception exists that wills are simple documents stating who gets what after someone dies. Actually, developing a will that can withstand objections brought up in probate court is complex and time-consuming. Family estate attorneys recommend everyone begin building a will as soon as they begin accumulating valuable items, such as real estate, savings accounts, IRAs or other liquidable assets.

6 Reasons Why You Should Review Your Will Annuallyupdating-will-for-future-estate-planning

Neglecting to update your will at least every two years may result in others receiving hard-earned assets you don't want them to receive. There may have been changes in your life involving relationships and family members mentioned in your original will, significant changes to your assets or modifications to tax laws that affect your monetary worth. Other reasons for reviewing your will include:

  • If you have adopted a grandchild, niece, nephew or non-family children
  • If you have remarried, divorced or been widowed
  • If someone named in your will has passed away
  • If you have become involved in a non-profit or charitable organization to which you want to contribute
  • If you have relocated to another state or country
  • If you are 70 or older (the age you must start taking distributions from IRAs or 401Ks).

When making minor changes to a will, you can use something called a codicil that legally adds a "P.S." statement to wills. However, if you want to make major alterations to your will, you should contact a lawyer to revoke your old will and re-write a new will.

Avoid These Pitfalls When Building a Willsenior-woman-working-with-attorney-for-retirement-planning

Improperly executed wills usually involve technicalities such as having two other adults sign your will in your presence, wrongly worded passages or questions about the mental capacity of the person making the will. Family members or ex-spouses who feel they didn't get their fair share may contest the will in probate for a variety of reasons. When this happens, a probate judge typically decides who should get portions of someone's estate. The key to preventing wills from being contested is having a clearly written, validly executed will prepared by a seasoned probate attorney.

When drafting your will:

  • Do not leave out any assets you want only certain people to receive, regardless of their worth
  • Choose an executor and backup executor you trust
  • If applicable, select a guardian to take care of minor children
  • Be aware that beneficiary designations bypass wills (Life insurance, IRAs, annuities and other accounts do not pass through probate)
  • Consider a backup plan in the event something might happen to the people named in your will simultaneously (if all were together and perished in a house fire or accident, for example)
  • You can also choose to delegate gifts specifically to certain individuals. For example, you can say something like "I want my grandson Bill Smith to receive all my rings, necklaces and other jewelry" or "I wish to leave my baseball card collection to my neighbor, Fred Williams." However, be aware that your gifts may be taxed according to your state's tax laws.

Remember, if you pass away without leaving a will, your estate will be settled according to the laws of the state in which you lived. A probate judge will appoint an objective administrator who decides how your estate is divided.

Your Will and Charitable Gift Annuities

In legal terms, a charitable gift annuity is a gifting transaction whereby someone transfers liquidable assets to a charitable organization in exchange for a lifetime annuity and for tax benefits. Just like other lifetime annuities, the payments cease when the beneficiary passes and the charity keeps the remaining assets.

A charitable gift annuity is one of the most rewarding and versatile methods of charitable gift planning. In addition to offering an attractive alternative to Certificates of Deposits (CDs), charitable gift annuities also:

  • Guarantees the gifter receives an annual income
  • Provides a partially tax-free form of income
  • Can help lower the amount of income tax paid by the giftee
  • Decreases capital gain tax payments
  • Is a great way to supplement retirement income
  • May help you save on social security benefit taxes
  • Creates savings for estate tax and non-taxable estates
  • Relieves the stress of certain money management responsibilities
  • Gives you the opportunity to provide income to others who need it

When you decide to supplement your retirement income with a charitable gift annuity, you can choose to defer your gift annuity until you reach your expected retirement age. Advantages to deferring payments include a substantial increase in your income and the amount of charitable deductions you can take when filing taxes.

Read these Frequently Asked Questions about gift taxes on the IRS website for more information on gifting and taxes.

Benefits of Planning Ahead

These types of decisions are best made in advance - allowing you to take full advantage of the benefits from making them early on. An updated will provides peace of mind for yourself and your loved ones. A charitable gift annuity is a great way to provide meaningful sponsorship for a cause that you care deeply about. Lastly, making these decisions early allows you freedom of choosing who will benefit most from them.

differences between for profit and non profit senior living organizations

About Emily Shoemake

As the Digital Content Assistant at Presbyterian Senior Living, Emily produces content for the PSL blog and engages with our audience on social media. Emily is a Shippensburg University and Delta Zeta alumna from Bedford County, Pennsylvania.