When senior citizens begin estate planning, they should keep a few key considerations in mind. First, think about making a basic estate plan. Also, determine whether there are special tax issues involved. Finally, decide whether more complex legacy planning is wanted.
Making a Basic Estate Plan
If you are a senior citizen, you should consider making at least a basic estate plan. An estate plan involves more than just a will – you may want an advance directive, a trust, or other structures. Also, you may need to make changes to retirement plan documents too.
Estate plans often start with wills, but wills only address how some of your assets will be distributed. These assets include real estate, cash, and personal property. Wills do not cover issues such as who will make medical decisions for you when you cannot. They also do not dispose of many special kinds of assets such as retirement account money, pensions, and anything kept in a trust.
Special Tax Issues for Seniors
Many seniors need to consider issues like when they take distributions from their IRAs, and when they can qualify for Social Security or Medicare. Your tax bills, as well as your estate’s tax bill, could vary greatly depending on how you derive your income during retirement and how much you have left over. Substantial assets (in the millions of dollars) could leave your estate owing the IRS due to the federal estate tax. Paying the estate tax reduces the money your estate can distribute to your heirs. As a result, you should inquire with your estate planning attorney about tax considerations.
Do You Need a More Complex Plan?
Some people may need more complex estate plans because of their substantial assets or their life situations. For example, if you have been diagnosed with a serious illness, you may need a power of attorney, advance directive, and even a conservatorship to help maintain your estate. If you or your spouse is not a United States citizen, you might need a special Qualified Domestic Trust (QDOT) to protect yourselves from tax bills.
If you would like to leave a legacy to grandchildren, grandnieces, or grandnephews, you should consult an attorney about how to plan. The IRS assesses a “generation-skipping transfer tax” in some cases when people leave inheritances to these relatives. Or you might want to set up a family trust, foundation, or other long-term giving structure. All of these more complex estate planning structures could become part of your plan if you wish.
Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.