There are many times in life when people have to think about their legacy or their vulnerability. Estate planning often becomes a priority when an adult marries or has children. For others, the death of their parents or other difficult situations, like the diagnosis of a chronic illness, may inspire them to create or update estate planning documents.
For some people, retirement is what forces them to think about their finances and health. Some adults don’t establish an estate plan until they reach retirement age. Others decide to drastically overhaul and expand their estate plans as they prepare for retirement. What estate planning moves or adjustments are often necessary for those on the cusp of retirement?
1. Long-term care planning
Those thinking about retirement need to consider the possibility that their health may change as they age. Even those who have saved aggressively for retirement may not have enough to pay for in-home nursing support or a bed in a nursing home using just their own resources.
They need to be able to qualify for Medicaid, which means making major financial moves at least five years before they apply. Planning to cover potential long-term care costs is a practical issue many people preparing for retirement must address.
2. Incapacity planning
The possibility of care needs is the only health issue that people have to address as they prepare for retirement. As people age, they may experience cognitive decline. Those with genetic predispositions might develop Alzheimer’s disease or dementia.
People can draft durable powers of attorney before their health declines. They can choose someone they trust to act as their agent or attorney-in-fact. Proactive planning can help protect people from guardianship and allow them to determine on their own behalf who manages their finances and medical needs.
3. Updating beneficiary designations
Family circumstances tend to change over an adult’s working life. Especially if they drafted an estate plan while their children were minors, their circumstances may be vastly different now as they prepare for retirement. People may want to add their grandchildren to their estate plans. They may need to remove former spouses or estranged family members as beneficiaries.
In addition to adjusting who may inherit from the estate, they may need to update what assets they included in the estate plan as their personal holdings may have shifted substantially. People may also need to reconsider who they nominated for positions of authority based on changes in their relationships and in the health of the people they selected for those positions.
Recognizing that retirement is an opportunity to create or update an estate plan can help people protect themselves before they become vulnerable due to advanced age. It is a good idea for retiring adults to draft estate plans if they have not done so already or make major changes to their existing documents.