Estate planning is more than determining who you want to inherit your worldly goods. It’s about planning for taxes, protecting yourself while alive and making life easier for heirs by streamlining asset transfers. A recent article from Kiplinger, aptly titled “Here’s How Estate Planning Can Make Your Retirement Easier,” explains it in detail.
Trusts are used to protect assets and are widely considered the most effective tools for estate planning. Timing matters in estate planning. If you might need to apply for Medicaid for long-term care, keep in mind there is a five-year look-back period. Trusts need to be funded for at least five years before assets are considered exempt for Medicaid purposes.
Let’s say you establish a trust when you turn 70 but need long-term care at age 73. Medicaid won’t consider you eligible until age 75. We can’t know when we will need long-term care. However, planning ahead makes applying for Medicaid better than dealing with an application during a health crisis. Talk with your estate planning attorney about a Medicaid Asset Protection Trust to see if this might be a good fit.
Life insurance is often used to help with estate taxes. While most of us aren’t likely to worry about estate taxes while the federal exemption remains high, there are still state estate taxes and some state inheritance taxes to consider. The federal estate tax exemption may not sunset in 2026. However, a life insurance policy may be an option for your family if it does. Today’s life insurance policies are often combined with long-term healthcare coverage, which is always a wise option as we age.
Beneficiary designations are an often-overlooked estate planning pitfall with costly consequences. If you’ve named someone on an account as the beneficiary, they will receive the asset, regardless of what your will says. If you neglect to update your beneficiary designations, it will be next to impossible for other heirs to get the assets, even if they do go to court. This is an easy thing to fix. Review beneficiary designations every time you review your estate planning documents.
Estate and retirement planning doesn’t end once you have a plan in place. Both estate plans and retirement plans need to be monitored and updated. Tax laws change, markets fluctuate and personal circumstances change.
Regular reviews of your estate planning with your estate planning attorney every three to five years will allow you to ensure that your wishes are current, and no opportunities have been missed. Regular updates will ensure that beneficiaries are correct, trusts are funded properly and your will is still aligned with your state’s laws.
Reference: Kiplinger (Feb. 18, 2025) “Here’s How Estate Planning Can Make Your Retirement Easier”