Planning Nearing Retirement

Serving Clients in New York City and the New York Metropolitan Area

Just a moment ago you were in the thick of your busy, busy peak earning years. Now you can see a new adventure rapidly approaching. What is it? Retirement.

Are you getting ready?

Chances are good that your children have left the nest. Perhaps you are assisting your aging parents with their personal, health care and financial responsibilities.

As in your Peak Earning Years, this would be a good time to create (or revisit) your estate plan and make sure your adult child(ren) and parents have their legal ducks-in-a-row, too.

Unfortunately, many married couples believe that they can make decisions (whether personal, health-related or financial) for each other should either spouse become unable to do so due to a serious injury or illness. Nothing could be further from the truth!

Without proper advance planning to appoint your spouse as your decision-maker, if you are unable to do so, he or she will not have legal authority to make even fundamental decisions for you or affecting both of you. For example, medical privacy laws will deny your spouse/partner access to your medical records and the ability to consult with your physician(s). Financial laws limit control over your finances, and IRS regulations prohibit filing a “legal” joint income tax return, just to name a few.

Unless you legally appoint the decision-maker of your own selection  through proper estate planning, then a guardianship judge will select one for you. While the judge will likely appoint your spouse, the probate court process to accomplish this is long, expensive and can be a burden to your spouse/partner.

Did you know that without having a plan in place, your assets may be distributed after death based on broad state laws written for people who do not have their own estate plan? Of course, this very impersonal estate plan written by state lawmakers will likely not reflect your own unique circumstances and objectives for your spouse/family and assets. In fact, depending on how your assets are titled and how your beneficiary designations are arranged, you may disinherit your important family members!

Now, let’s consider something no married couple wants to think about.

What if your spouse or partner or the person you rely on dies before you or your relationship changes?  Do you have an estate plan in place?

Without proper legal planning, your ex-spouse (as surviving parent/guardian) would likely be appointed by the probate court to manage the inheritance you leave to your minor child(ren). To make matters worse, what if your child(ren) later predeceases your ex-spouse, and are single and have no children? Who would inherit your assets then? That is right … your ex-spouse, as the next-of-kin of your child(ren).

Chances are you made a few solemn promises to your new spouse on your wedding day. Among them were promises to provide for them financially. In the absence of a premarital agreement, most spouses blend their wealth. For example, they title their respective assets in the names of both spouses and also designate one another as the primary beneficiary of their respective retirement plans and life insurance policies.  This is perfect for traditional families, but in a blended family the deceased spouse’s children may be disinherited.

Regardless of whether children are reared in a traditional nuclear family or in a blended family, an estate plan should protect any inheritance both spouses and their respective children.

Does your retirement include how you will pay for long-term care, if you need it?

Have you noticed how expensive the continuum of care is? From in-home assistance to assisted living to skilled nursing the expenses can destroy savings and investments created over a lifetime of hard work and thrift.

As you near retirement, lock-in a long-term care insurance policy(s) while you are still able to physically and mentally qualify. Some versions of coverage only pay if you need long-term care assistance, but others can now do double-duty and turn into life insurance if you do not need such assistance. That is a popular hybrid alternative to traditional long-term care insurance.

There is a 70% risk of needing long-term care once you reach age 65. Curiously, 70% of people think they will not be among those 70% needing care (i.e., denial) and 70% of people think Medicare will pay for it. You do not want to be in that 70% who are in denial, ignorant or both.

What to Consider as You Are Nearing Retirement:

• Will I have money to retire?
• Do I downsize my house? What are the tax issues of a sale?
• Can my spouse continue to be supported if I die first? How can I protect my spouse and our child(ren)?
• What will happen if either or both of us get sick?
• When should I start drawing down on my tax deferred retirement savings? Who should I name as beneficiaries: my wife, my kids? 
• Should I use a trust to protect my assets? What kind of trust?