Retirement & Legacy
Planning for Your Retirement & Legacy
Serving Clients in New York City and the New York Metropolitan area
You have arrived. Just a moment ago you were Nearing Retirement. When did you get to this place in life so quickly? What do you need to do right now in preparation for that day?
This is often an exciting, yet bittersweet time of life.
Chances are good that your children have left the nest with lives and growing families of their own. If your parents are living, perhaps you are becoming their caretaker, just like they did for their parents. This includes taking care of your aging parent’s personal, health care and financial responsibilities. Your own children may also be having children of their own and you are happily included in that new family circle. You may be experiencing demands from both sides while trying to “enjoy” your retirement years. We often call this the “sandwich generation”, as you try to meet the demands of your aging parents and the needs of your children and grandchildren.
If you are single and retiring you have different but also important considerations, such as maintaining your current lifestyle, planning for yourself, and considering who will assist you as you age and may need long-term care.
Unfortunately, many people believe that they can automatically make decisions (whether personal, health-related or financial) for a family member or a spouse when they are unable due to a serious injury or illness or incapacity of some kind. This is not always true! Without proper advance planning to appoint your chosen representative if you are unable to do so, he or she will not have legal authority to make even fundamental financial or health care decisions for you. For example, medical privacy laws will deny your spouse/partner or family member access to your medical records and the ability to consult with your physician(s), financial laws limit control over your finances, and IRS regulations will prohibit filing income tax returns, just to name a few.
Unless you legally appoint a decision-maker of your own selection, in advance through proper estate documents, you may need a court to select one for you. While the judge will likely appoint your spouse or a close family member, the court process to accomplish this is long and expensive and can be a burden to your family.
Did you know that without having a plan in place, your assets may be distributed according to the state law, not your specific wishes? These laws were 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 heirs or your spouse and assets. In fact, depending on how your assets are titled and how your beneficiary designations are arranged, you may inadvertently disinherit your important heirs.
Now, let’s consider something no one wants to think about.
What if one spouse dies and the other remarries? Or what if your primary heir does not survive you? Have you named alternate heirs to succeed them? This is a special risk for couples who remarry after the death or divorce of their first spouse, with whom they may share children. About half of what you have accumulated in that first marriage could pass to the new spouse, and not to your children. If the remarriage does not work out, it could result in disinheriting your own children and grandchildren. The best solution is to have a premarital plan, and a plan for future inheritance. It is best to go into a new relationship with both eyes open.
In short, the surviving spouse will need to have a legally enforceable premarital agreement in place before saying “I do” on his or her wedding day. In a recent University of California study, researchers found that 60% of widowers were involved in a new relationship within two years after losing their wives, while only 20% of widows had a new relationship. According to the U.S. Census Bureau, men are 10 times more likely to remarry after age 65, and the average time before they are remarried is just 2.5 years. When dad remarries a new wife some 20 years his junior that can trigger all kinds of drama in the family, but a plan can solve some of these issues.
When it comes to your children, great care should be given to protect any inheritance both for them and from them. For starters, wealth representing a lifetime of your hard work and thrift can be squandered very quickly. In addition to good old-fashioned squandering, an inheritance can quickly vanish through divorces, lawsuits and bankruptcies.
Fortunately, with proper (and very careful) estate planning, you can both honor your vows to your new spouse/partner and provide an inheritance that is protected for and even from your own children. Remember, two things you cannot choose in life are your own folks and the spouses of your children.
With full retirement comes a need to plan for the future years that, as we age in place, may require long term care planning in addition to estate planning. Have you noticed how expensive the continuum of care can be in the later years? From in-home assistance to assisted living to skilled nursing the expenses can quickly consume savings and investments created over a lifetime of hard work and thrift.
Before you retire, you may have purchased a long-term care insurance policy(s) while you were able to physically and mentally qualify. Some versions of coverage only pay when 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 alternative to traditional long-term care insurance. We can advise you about these hybrid plans and other options for care coverage.
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 (i.e., ignorance)! You do not want to be in that 70% who are misinformed or misguided or both. New York, where our firm is located, has comprehensive long term care services funded by state and Medicaid dollars, which our staff is well trained to access when there is a need.
If you will need assistance with the activities of daily living (e.g., eating, bathing, dressing, toileting, and transferring), you are eligible for service in New York but many have income or resource guidelines.
Other pressing issues during the retirement years center around managing and maintaining your income and savings. Our planning process involves reviewing your entire financial plan, including your fixed income sources, your retirement savings and your non-retirement assets. The first step in a full retirement plan is to review how your assets are titled and who your named beneficiaries are. Do these need review and updating? Not all assets are governed by your will; some pass by the beneficiary designation and this is an important task in good planning.
Another concern in estate planning, in the retirement years, is how you can help your heirs avoid probate. The media is full of cautions about the “horrors” of probate. This court driven process can be both expensive and slow.
We can help you coordinate the beneficiary designations on your life insurance and retirement plan(s) to avoid unpleasant and unintended consequences. For example, all beneficiary designations for your retirement plan(s) need to be revisited, especially due to a U.S. Supreme Court decision handed down on June 12, 2014, (See Clark, et ux v. Rameker).
The Clark case sent shock waves through the estate planning community after a unanimous court ruled that inherited IRAs are not “retirement funds” within the meaning of federal bankruptcy law. Accordingly, if your children or grandchildren are “direct” designated beneficiaries of your IRA, then the distributions may be subject to their divorces, lawsuits and bankruptcies. Careful planning is required to protect these important assets, while at the same time preserving the ability to stretch distributions as long as possible for your beneficiaries.
Questions to Ask:
Do I need a Trust or a Will? What is the difference?
Should I downsize my home?
Do I have enough money to pay for care?
Do I still need my life insurance?
Should I preplan my funeral/burial?
What is my exposure to Estate tax and Capital Gains tax?
When should I gift away my money and what are the risks?
How do I pick an Executor or Trustee?
Should I have joint accounts with my children? What are the dangers?
How do I make my retirement savings last?
Should charities be part of my planning?
How should the federal estate tax law impact my life plans?