When we look at the steps taken in our investing lives, the basics are simple. As working investors in the initial stages, the priority is accumulation and growth. Therefore, we participate in retirement plans such as IRA’s, 401-k plans, etc.
The next phase is the retirement stage when the focus shifts from accumulation to preservation and maintenance of the nest egg. Growth is a component of any retirement plan, but protecting your purchasing power during retirement is critical. You also want to generate a predictable stream of income during retirement, in order to avoid compromising your lifestyle.
The final stage of successful retirement planning is often overlooked: that’s the estate planning phase or the strategy of a succession plan to pass assets to your family. There are many estate planning tools that can be used to execute an estate plan. You can create a personal trust. Under this arrangement, your assets are transferred into a trust during your lifetime and then transferred to the trust at death. It’s important from both a tax standpoint and an allocation standpoint, regarding who receives what and how much. This is what your estate plan does for you and your family.
Work with an experienced estate and trusts attorney to establish your estate plan, so you can achieve your final objectives when passing assets to the next generation. Some individuals like the ability to exercise control with an effective plan to pass assets to their beneficiaries, without the need of trusts or probate.
There are many types of insured annuity strategies that will pass assets immediately to the beneficiaries, without the need of probate. Avoiding probate is frequently part of a strategy to make the assets available, immediately after the death certificate is issued.
Some see the foundation of their estate planning as the incorporation of life insurance. This lets the beneficiaries inherit assets, generally tax-free. Avoiding a taxable event upon death is also appealing, based on both taxes as well as overall portfolio values. Talk to a professional about your situation.
Reference: Marco Eagle (June 11, 2017) “Money Talks: Estate planning tools”