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How Can Californians Integrate Retirement Planning With Estate Planning for a Secure Future?

I’m Planning for Retirement, Why Should an Estate Plan Be Included?

No matter your age, none of us know what tomorrow may bring to our families or us. This is one of the main reasons an estate plan is critical to set up now before the need arises.

By drafting a professional estate plan, which would usually take effect if you died, become incapacitated, or retire, you can ensure that you have a viable, rational plan in place before it is needed.

If you are in an accident and are incapacitated or killed without a professional estate plan, all your assets, real estate, and more could end up in the hands of the state. This is never a favorable outcome for you or your family and heirs.

The state will distribute your assets, etc., based on its succession schedule, which may differ from what you intended.  

Additionally, if you are approaching retirement, an estate plan is ever more valuable, or revisit, and there are numerous reasons why, such as:

  • You must officially name your beneficiaries. When planning for retirement, you must review and update your beneficiaries on your life insurance and any retirement plans and make “pay-on-death” instructions.
  • Having powers of attorney in place – When retiring or planning to retire, you want to have your appointed relatives or professionals in place to manage your estate or make vital medical decisions if you cannot do so. You want to ensure that people you trust oversee these critical issues that you trust before they are needed.
  • Your retirement plans and estate plans should complement each other – By creating or reviewing your estate plan before you retire, you can make sure there are no issues with your heirs, beneficiaries, and all inheritances. Ensuring that your estate plan coincides with your retirement plans will ensure your precise wishes are carried out when needed.

When professionally drafted (or modified) by a thorough and skilled California estate plan lawyer, your estate plan can fully encompass your retirement plan and estate planning wishes after your death.

Should My Life Insurance be Included in My Estate Plan and Why?

Life insurance commonly plays a significant part in your estate, and in California, it’s even more critical due to the state’s very high property values and unique tax laws. Without the guidance of a well-drafted estate plan, these items can significantly complicate the distribution of your assets and possibly increase tax liabilities for your heirs.

California’s legalities and tax issues can differ greatly from those of other states, as the state has specific probate laws and considerations that must be legally navigated with extreme caution. For example, California’s federal estate tax levels on community property affect how assets are managed and inherited; without previous thought and instruction, this could severely complicate your heir’s inheritance and more.

When included in your estate plan, life insurance offers a layer of financial protection. It can also be a strategic tool to address specific challenges, such as creating liquidity to cover estate taxes and miscellaneous expenses.

Therefore, when you retire, life insurance, when included in your estate plan, will provide more efficient, controlled, and positive outcomes for your heirs.

How Are My Retirement Plans Managed In My Estate Plan?

In many cases, assets you have at retirement may transfer directly to your heirs and beneficiaries if these beneficiaries are legally designated before your retirement or death. However, if that is done, assets are impacted by federal and state income tax and possibly federal and state estate tax.

If done professionally, including all your assets in an estate plan can significantly reduce taxes on your retirement assets as they pass to your heirs and beneficiaries.

Some examples of ways this can be done are as follows;

  • Carefully designate your beneficiaries and review these designations before taking distributions from your retirement plans. Ensure your beneficiaries know the applicable tax implications and will benefit from these accounts when they withdraw assets.
  • Discuss an irrevocable life insurance trust (or ILIT) with your knowledgeable estate planning lawyer. Forming and ILIT may provide the needed liquidity to pay the federal estate tax related to your retirement assets.
  • If you are giving some of your estate to charity, consider designating retirement plan assets for this purpose. These designated charitable donations may escape both estate and income tax.
  • Also, special rules often apply to your surviving spouse. Make sure these are addressed and discussed with your estate planning lawyer.

Of course, every retirement plan and estate plan differs. Still, your thorough, detail-oriented, and empathetic estate planning lawyer will always provide all the options that pertain to and complement your retirement plan.

Some Significant Facts About Estate Plans.

In today’s complex world, estate planning isn’t only for the rich. When you retire or pass on, you still want your family and heirs to be solvent and protected.
Simply put, there are four main reasons to consider an estate plan, even if you are relatively young or nearing retirement.

These are:

  • An estate plan, including retirement plans and more, protects your heirs and beneficiaries – These days, even “many middle-class” families should have a solid, professionally drafted plan if the breadwinner (or breadwinners) is injured, incapacitated, retires, or dies. Any assets included in the plan can usually be protected from excessive taxes, internal family conflict, and much more.
  • Your estate plan will protect your children and grandchildren – No one believes they will die young, but it happens, and if you have younger children (or even grandchildren), you want your plans for their future to be dictated before you are out of the picture.
  • Your estate plan avoids a vast tax bite – Protecting your heirs and loved ones from the Internal Revenue Service (IRS) is significant, and an essential part of estate planning is transferring your assets to your heirs with the most minor tax burden you can provide.
  • A professional estate plan avoids family disagreements and conflict – Your death or incapacitation can turn family and heirs against each other. But, if you clearly define your wishes ahead of time, these family conflicts can be avoided. Even after retirement, things change, and you want your wishes made as clear as possible.

I’m Planning for Retirement and Need Guidance; How Should I Proceed?

Planning for your future retirement or what may occur after your death is usually an overwhelming task, with many issues on the table, each of which could be critical to your family’s future and financial well-being.

Also, every estate, its assets, liability, and responsibility differ, and only with the professional advice and guidance of a well-versed, caring, and knowledgeable estate planning lawyer can you be sure your strategy is right for you, your retirement, and your family.

The estate planning lawyers at Celaya Law have a long, successful, and caring history of ensuring that your retirement plans and your family’s future are well-protected and secured.

Call them today for the critical advice you need at (707) 754-0977 for a full consultation on your retirement and estate plans, and they will thoroughly and compassionately provide you with the options you need.

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