Planning for the future is important, especially as you approach retirement age. One aspect of this late-life planning that often gets overlooked is writing a will.
Having a complete estate plan helps ensure the distribution of your assets according to your wishes. With that in mind, there are three key items to consider adding to your estate plan before you decide to retire.
Wills and trusts
Drafting a will is a fundamental step in estate planning. A will outlines how you want your assets to pass on upon your death. It allows you to specify beneficiaries for specific items or properties and appoint guardians for minor children if necessary. Additionally, setting up a trust can provide more control over how and when your beneficiaries receive inherited assets. Trusts can also help minimize estate taxes and avoid the probate process, ensuring a smoother transition of your assets to your heirs.
Powers of attorney
Another integral component of estate planning is designating powers of attorney. These legal documents authorize someone to make decisions on your behalf in the event that you become incapacitated or unable to manage your affairs. There are two main types of powers of attorney to consider: a durable power of attorney for finances and a healthcare power of attorney. A durable power of attorney for finances grants someone the authority to handle your financial matters, such as paying bills or managing investments. A healthcare power of attorney allows someone to make medical decisions for you if you are unable to do so yourself.
Beneficiary designations
Many assets, such as retirement accounts, life insurance policies and bank accounts, allow you to designate beneficiaries. Be sure to review and update these beneficiary designations regularly, especially after significant life events such as marriage, divorce or the approach of retirement.
Surveys show that as few as 46% of Americans have a functional will. While you can certainly put off your estate planning until well into retirement, accounting for certain items before you retire can help smooth things over in the future.
