“With your career in the rear-view mirror, and a nest egg to provide a comfortable retirement, you have no big financial decisions left, right?”
The Almanac’s recent article, “Five mistakes to avoid when planning your estate,” reminds us that you still have to consider your estate, even after all of your other careful planning.
You should be certain that your assets will be distributed exactly the way you want, to the people or organizations you want and that the government won’t take any more than is necessary. To help with this task, here are some of the top estate planning mistakes you need to avoid.
No estate plan at all. You at least need a last will, financial power of attorney and health care directive. These should be updated with any major life event. You might also look at a trust that will govern how your assets will be managed for your beneficiaries. If you have no estate plan, the state will default your assets to your spouse or closest blood relatives. This may not be what you really wanted, and it can be time consuming, costly and result in large tax liabilities.
Not updating beneficiaries or listing contingent beneficiaries. All of your IRAs, 401(k)s, annuities, and life insurance policies should accurately designate the person or persons you want to receive the proceeds.
Investing lifestyle and legacy assets in the same way. There are plenty of retirees who spend well below their means and can live comfortably on a much smaller investment portfolio than what they’ve accumulated. You should consider dividing your investment portfolio into a “lifestyle” portfolio, invested conservatively, with a focus on producing retirement income, and a “legacy” portfolio, invested more aggressively, with a focus on maximizing your retiree’s legacy.
Not reviewing life insurance policies. It’s crucial to review your life insurance policies to be certain the policy is performing as expected, and that it’s going to be there when you need it. Your policies should be up to date, reflect your current needs and the accounts must be properly integrated with your overall financial goals.
Reference: The Almanac (December 26, 2017) “Five mistakes to avoid when planning your estate”
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