If you are worried about what will happen to your assets once you pass away, estate planning is essential. You’ve worked your whole life to build up assets that you can pass on to give your family and loved ones a better life, so you need to make sure these assets are distributed and divided in the way you want them to be, rather than risk this not happening.
In this article, we’re looking at estate planning for senior citizens. What is it, and what do you need to consider when you are planning for your death? It may not be the most fun thing to think about, but it can certainly give you peace of mind.
What Is Estate Planning?
Estate planning is preparing tasks to distribute a person’s assets if they pass away or become incapacitated. It is the process of working out the distribution of the assets to heirs, such as family and children. The estate plan is normally set up by working with an experienced company or attorney who can assist with estate law to help with the legal aspects and with the taxation.
If you do this yourself, you risk not getting the best “deal” for the future. Taxes can be applied that you can prevent by following certain due processes to ensure your estate planning is as financially efficient as possible. This isn’t just a case of “who gets what” it is about maximizing the assets you are able to leave behind.
Assets do not just mean the financial value of bank accounts and savings accounts, either. There is a huge amount that may make up the assets of a person, and this can quickly get confusing if you don’t know what you are doing when it comes to estate planning. Assets include houses, cars, stocks and shares, paintings and valuable belongings. They can also include savings accounts and pensions. Don’t forget, debt will also need to be considered.
People do all sorts of different things with their assets. It is a matter of personal choice. You may wish to leave to your spouse or loved one, your children, or even to a charity or foundation. It is your money, so you are able to leave it to whoever you wish.
The Estate Planning Must-Haves
What are the steps to take during estate planning? What steps absolutely need to be taken, and what is the checklist to ensure that you have taken the right steps in your senior citizen estate planning?
Most of us have heard of a will. This is a legal document that demonstrates how the property a person owns, and their minors should be handled once they have died. In senior citizens, young children are not usually on the scene.
The individual can, through the will, express what they wish to happen. Also, the will shows whether they should create a trust after death, which can go into effect during their lifetime if they want.
Once a person is deceased, a process called probate comes into effect. This is the administration of the estate, and it is the way that the will is authenticated. The custodian of the will goes through a probate court or the executor, and within 30 days, the will should have passed through probate and the assets distributed.
Probate is supervised by the courts. It is a legal procedure to establish the power of the executor of the will.
Durable Power of Attorney
This is a term you may have heard but may not have fully understood. A durable power of attorney is often abbreviated to DPOA. The DPOA is the person allocated to control the legal and financial matters after the principal of the will becomes incapacitated, or passes away.
DPOAs are put into place as the principal signs off on a document passing on power of attorney for healthcare and financial matters. This is the case of allowing someone you trust to make decisions after you are able, such as decisions on treatments, and then the legal outlook of your finances once you have passed. This can be a difficult job. The DPOA may have to make tough decisions such as when to turn off life support, as this is not a decision the principal will be able to make at this point.
Appointing a DPOA should not be done lightly, this needs to be someone who is trusted. They will be making decisions on finances should they need to be made after you have passed. Often, this is allocated to a family member or trusted friend.
This is separate from the will, even though many people get them confused. A designated beneficiary is the person (or trust, estate or charity) that is set to receive a payout of the balance of accounts after the death of the owner of these assets. This can be things like retirement accounts or life insurance settlements paid after the will has been settled.
The person who is named as the beneficiary receives the balance if the account holder has passed. When putting together a retirement plan account or life insurance policy, you should name the designated beneficiary in this. You can review it regularly, and this can be an area our team can help to ensure the planning has been done properly.
This is one of the many areas of estate planning that needs upkeep. Don’t leave it for decades as families change. You should reevaluate when there are deaths, new births, marriages, remarriages and divorces within the family. You may change the beneficiary based on the situation you find your family in. We all know how complicated families can become.
Letter of Intent
The letter of intent may not be valid in terms of the law. It isn’t technically a legal document. However, it does help during probate. Probate judges will almost always take the letter of intent into consideration. It can also be vital if there is a problem along the way when distributing your assets. So what is it?
Simply put, a letter of intent is a document left to the executor of your will in order to define what you plan for specific assets or to make specific arrangements after your death. This is a space for miscellaneous requests. It can be the correct space for making funeral arrangements or requesting specifics such as this.
The letter of intent is also key for other reasons. It can allow you to request what is done with specific assets. Let’s say you have a specific painting that has sentimental value. You can request that this is left to someone you wish to have it within the letter of intent. Some people don’t have a letter of intent in their will, but it is recommended. It doesn’t take a lot to put together a letter of intent and it can prove to be a crucial component in the estate planning process.
Healthcare Power Of Attorney
We’ve already briefly mentioned this. Healthcare power of attorney is passing on the decisions regarding your healthcare to someone you trust. They will be able to make decisions legally when you are no longer able. This can vary from what types of treatments you may require, but commonly relate to end of life care. Aspects such as when to turn off life support are a big part of the healthcare power of attorney (HPOA). This isn’t something for the faint-hearted as it can be a difficult task, but it is vitally important nonetheless.
When designating HPOA, don’t just think about the decisions that are being made, think long and hard about the effect it may have on the person you are asking to make these decisions. It is bound to be an emotional time.
This is a clause placed within wills and trusts. It is not relevant for everyone and usually applies to minor children, or if you are trying to have kids when creating a will.
This is where you outline what you want to happen to the people who rely on you in the event of you passing away. It is vital at any age if you have children, as it means you have a say in their future should the worst happen to you.
Though not relevant to every will, if this clause does need to be included it is arguably the most important aspect of estate planning. You need to ensure that you make the right, most sensible decisions for your children.
Choose carefully when you are deciding upon a guardian. Think about the health they are in, how they view the world, whether they can afford children and whether they even want to. In many cases, it will be instantly very obvious who you wish to give this power to. It can be a sibling or a friend. Often, people look for a family of a similar age to take on guardianship. Older people may become unwell and this can lead to even more hardship for the children.
You can name a backup, too. In the event that your first choice is unwilling or unable to take on the children, a backup may be vitally important.
If you don’t create these designations then you are giving up your say in the future of the children. The worst-case scenario is that the court can then mandate your children becoming wards of the state. They may end up in care that you would not have outlined as being suitable or appropriate for them.
Common Estate Planning Mistakes
There are mistakes people constantly make in their estate planning. This is one of the most important pieces of planning you will do, especially if you have a family, so you need to make sure you don’t fall foul of the common planning mistakes.
One of the most common things we see is not reviewing the plan. Situations change and you need to change with them. When there is a divorce, a death in the family, a new marriage or children are born, it is important to review certain aspects of your estate planning.
Somehow, some people fail to create an estate plan whatsoever. It is easy to assume that people will just leave your stuff to your next of kin and it will be distributed fairly, but when money is involved you should not take that chance. When guardianship of your loved ones is involved you certainly shouldn’t be taking any chances whatsoever.
Another mistake we see regularly is people failing to work with the professionals. You do have the option to try and create an estate plan yourself, but this is much more difficult, and you need to establish a lot of knowledge of the laws. It is normally far simpler to work with a professional to create a plan that you know will be suitable and that you will be legally covered when it comes to your powers of attorney and your assets.
New Tax Law And Estate Planning
Taxation is something you need to deal with when leaving assets behind. In 2017, new taxation laws were brought into effect that means it is vital that you review your estate planning.
This legislation increased the estate tax exemption to $11.18 million for an individual and $23.36 million if you are a married couple.
The generation-skipping tax rate exemption also plays a huge part in real estate planning. This was a part of the same act. There is a temporary increase in exemptions currently set until 2025. This means that a lot of people can give away more of their estate to family and heirs and not have to pay tax. It is vital that you have advice from the pros on the best way to do this. It can save you from paying huge amounts of tax and increase what your family members end up with.
About the Author
Mike Johnson is a freelance writer and a human rights activist and an enthusiast. Through his extensive research and commitment to the field of law, Mike has established himself as a well-decorated writer in this field. Mike currently settles Las Vegas, and loves starting his day with a shot of espresso and cycling through his neighborhood.
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