Do I need to update my estate plan before I retire?
An estate plan should evolve with the different phases of your life. When we are young, it is a good idea to focus on guardianship documents and plan for the future care of our children, as we get older, we may want to set up a trust to help our grandchildren or to donate to a charitable organization. Because it should change to meet our needs, it is important to review and update our plan at major life events.
When it comes to retirement, three major steps to take to get our estate plan up to date include:
#1: Get an estate plan.
The most common problem: not having a plan at all. For those of us who do not yet have an estate plan, now is the perfect time. Putting together an estate plan provides the opportunity to review all of our assets. In addition to outlining how we want these assets handled in the future, the estate planning process can also provide some peace of mind about our financial situation before we take that step into retirement.
#2: Update beneficiary designations.
Certain accounts transfer through beneficiary designations. This is generally someone we listed on a fill-in-the-blank line within a boilerplate form used to start the account. Our estate plan generally cannot trump these designations. The institution that manages the asset will transfer it to the beneficiary designation.
Because of this, it is important to review and update this designation to make sure the asset goes where we want it to go. These designations are used on a wide variety of accounts, including life insurance policies, 401(k)s, IRAs, and annuities.
#3: Discuss the estate plan with loved ones.
An estate plan is much more effective if loved ones know where to find the documents and have at least a basic understanding of what the documents are set out to achieve. Explain the estate plan with loved ones to help better ensure the process goes smoothly and reduce the risk of any contention.