Baby Boomers: 5 Tips For A Great Estate Plan


Baby Boomers: 5 Tips For A Great Estate Plan

Life is more complicated than it used to be.  You don’t live the same way your grandparents lived.  A few examples of how things are different for you:

  • You’ll likely live longer than they did.  
  • You’re also more likely to need long term care because of this longer life expectancy.  
  • Your children may not live close by
  • You may have an IRA/401K

Changes in your lifestyle like these require you to consider different planning options.  Here are a few tips for creating a great estate plan:

  1. Protect Assets From the Nursing Home

 Historically speaking, taxes were the biggest financial threat in an estate plan.  Not anymore.  Nursing homes cost over $100,000 per year and your health insurance will not pay for it.  Don’t lose your life savings because you’re unlucky enough to have a stroke or Alzheimer’s Disease.  Work with a qualified Elder Law attorney to discuss an asset protection trust.  

  1.   Plan To Get Care On Your Terms

Whether you will need long-term care may be out of your control.  However, you can get the care you may ultimately need on your own terms.  If you want to stay in your home as long as possible, so be it.  But staying at home is expensive.  Plan for who would provide the care and how you’ll pay for it.  Most importantly, work with your attorney to put your desires in writing, so that your family can follow your instructions.

  1.  Don’t Give Outright Distributions

If you leave all your money to your daughter, what would happen if she got a divorce later in life?  Would your son-in-law walk away with half of your life’s work?  

Instead, consider leaving the inheritance to her in a trust that would protect it from her future divorce and other creditors.  Wealthy families have been leaving their children inheritances in trusts for decades.  That said, you don’t have to be wealthy to do this type of planning.  It doesn’t take much money. You just need a lawyer who will take the time to explain the pros and cons of all your options.  

  1.  Understand Your IRA Stretch-Out Rules

Many Baby Boomers have retirement accounts.  These types of accounts didn’t exist for previous generations.  They aren’t like the types of investments your grandparents owned.   Here’s a key difference:

When you leave tax-qualified money to a child, they can continue to enjoy tax-deferred growth for many years.  They will have to take annual distributions, but the remaining balance can grow tax deferred.  This can allow your retirement account to continue to grow in value even after you pass away.  This is a HUGE opportunity.  Work with a lawyer who will explain the rules and help you to protect these dollars for the future.  

  1.  Don’t Do It Yourself

With all the advertising dollars being spent by online document services, it may seem easy to do this planning yourself online.  It isn’t.  Sure, you may get a document and it may even be legal.  However, it will almost certainly be insufficient.  The online document services won’t deal with the complicated issues above.  

I get it.  Saving a few bucks on a self-prepared Will is enticing.  Unfortunately, many people have missed planning opportunities and subjected their families to unnecessary risks by using these websites.  Be Careful.  Don’t be tempted into risking your family’s well-being to save a few dollars.