Estate Planning: House in order

If you don't put your house in order, who will? It's unlikely that your financial affairs will take care of themselves should you die suddenly. They will, though, if you begin planning now for your death and what will happen to your assets. Putting a well-thought-out estate plan into action will make the financial side of your life much easier on your heirs when you die, especially your spouse. A little planning now may produce big savings down the road, primarily tax savings, but also savings in the form of reduced professional fees.

Estate planning is nothing more than a relatively straightforward extension of your general financial planning. Your objectives when developing an estate plan are generally to: ensure that you and your family are provided for adequately, now and during your retirement, and that your heirs are sufficiently provided for after your death; distribute your assets according to your wishes, both during your lifetime and after your death, while ensuring that the maximum benefits available accrue to your beneficiaries; minimize various forms of wealth erosion, taxes being the most prominent, both now and in the future.

Retirement planning shares two of these goals – providing adequately for you and your family and minimizing taxes. However, unless you are quite well-off, your estate planning and retirement planning objectives may come into conflict. With estate planning, you may be interested in passing on to your heirs, as much of your accumulative wealth as possible. From a retirement planning perspective, you are interested in accumulating and retaining as much wealth as possible, which will generate sufficient retirement income. Concentrating on one type of planning, to the exclusion of the other, will likely lead to problems, some of which may be difficult to rectify.

Attitudes today are changing. Those who have already retired tend to want to conserve their assets and pass them on to their children. However, their children, who are often better off than their parents, are much more willing to focus on themselves and wish their parents would do the same. I agree with the children. Estate planning does have its place, as does retirement planning. In other words, providing for yourself during retirement ought to be the objective of your financial plans as you approach retirement age.

If you have considerable wealth, or you are convinced that your retirement needs are more than adequately provided for, then some serious estate planning may be in order. Estate planning may involve loss of control and ownership of assets that you now own, and which could be used to generate income during your retirement years.

From a tax point of view, your estate planning goals generally are to: minimize and defer taxes now, and in the future, to preserve your accumulated wealth; and minimize taxes at death to maximize the amount of your accumulated wealth that passes to your intended heirs.