Estate Planning When Nearing Retirement
As you approach retirement, you are entering a new phase of life – one that brings both opportunity and uncertainty. You have spent decades building your career, accumulating assets, and providing for your family. Now, as the finish line comes into view, it is time to make sure your estate plan is up to date and reflects your current circumstances, goals, and concerns.
If you created an estate plan years ago, there is a good chance it no longer accurately reflects your life. Your children may have grown up. Your assets may have changed significantly. You may have experienced a divorce, a remarriage, or the loss of a spouse. The tax laws may have changed. Whatever the case, approaching retirement is the right time to revisit your estate plan and make sure it still does what you need it to do.
Spousal Decision-Making Misconceptions
Even after decades of marriage, many couples are surprised to learn that a spouse does not automatically have the legal authority to manage the other spouse’s financial or medical affairs in the event of incapacity. Without a properly executed statutory durable power of attorney and medical power of attorney, a spouse may need to petition a court for guardianship – a process that is slow, expensive, and public. As you approach retirement, the risk of incapacity increases, and the need for these documents becomes more urgent.
Remarriage Risks
If you have lost a spouse or gone through a divorce and are considering remarriage, it is essential to update your estate plan before the wedding. Remarriage can have significant – and often unintended – consequences for your estate plan.
A study by the University of California found that approximately 60% of widowers remarry within five years of their spouse’s death. According to the Census Bureau, nearly half of all marriages are remarriages for at least one partner. When you remarry, your new spouse gains certain legal rights to your property under Texas law – rights that may conflict with your desire to provide for children from a prior marriage.
Without proper planning, a remarriage can effectively disinherit the children from your first marriage. If you leave everything to your new spouse, your new spouse is free to leave those assets to anyone – including their own children from a prior relationship. A premarital agreement and a properly drafted trust can protect the interests of both your new spouse and your children.
Protecting Inheritance
As you approach retirement, you may be thinking about how to leave a legacy for your children and grandchildren. But leaving assets outright to your heirs may not be the wisest approach. An inheritance left outright is vulnerable to a beneficiary’s creditors, divorcing spouses, and poor financial decisions. A trust can protect your heirs’ inheritance from these threats while still providing them with the financial resources they need.
Long-Term Care Planning
One of the most important – and most often overlooked – aspects of retirement planning is preparing for the possibility that you or your spouse will need long-term care. The statistics are stark: approximately 70% of people over the age of 65 will need some form of long-term care during their lifetime. The cost of long-term care can be staggering – a private room in a nursing home can cost $100,000 or more per year, and those costs are generally not covered by Medicare or traditional health insurance.
Long-term care insurance is one option for addressing this risk. If you have not yet purchased a long-term care insurance policy, the window of opportunity may be closing, as premiums increase significantly with age and health issues can make you ineligible for coverage. Other options include self-insuring (setting aside sufficient assets to cover potential care costs), hybrid life insurance/long-term care policies, and Medicaid planning (for those who qualify).
At The Stegall Law Firm, we help individuals and couples who are approaching retirement revisit and update their estate plans. We address the full range of retirement-related concerns, including beneficiary designations, trust planning, long-term care, remarriage protection, and tax minimization. Our goal is to help you enter retirement with the confidence that your plan is current, comprehensive, and designed to protect you and your family.