You already understand the need to have a comprehensive estate plan in place. Likewise, you understand the need for a well thought out retirement plan. Are you aware, however, of the importance of integrating your retirement plan into your estate plan? While the two plans may succeed separately, there is little doubt that they will be more successful if combined. The estate planning attorneys at Kulas Law Group explain the need to include retirement planning in your overall estate plan.
The Importance of Retirement Planning
There was a time in the United States when the average worker could depend on a pension and a decent Social Security retirement check when they reached their “Golden Years.” Between the two they could live comfortably during their retirement years. Those days are long gone. Companies offered pensions to workers because, at the time, most workers spent their entire working career with the same company. The company, therefore, rewarded that lifetime employment with a retirement pension. Lifetime employment, however, is rare in the 21st century, making pensions equally rare. Furthermore, the future of the Social Security retirement system is unclear at this point. Even if Social Security retirement benefits do continue in the future, they do not go as far as they once did. The average Social Security retirement check in 2017 was $1,368. Given the cost of living in most of the U.S., this is hardly sufficient to live comfortably during your Golden Years, hence the need for retirement planning.
Merging Your Retirement and Estate Plans
Your primary estate planning goal is probably to protect and preserve assets throughout the course of your lifetime so that they can be passed down to the next generation at the end of your life. Your retirement planning goal, however, is to ensure that you have enough assets available to live comfortably during your “Golden Years.” Clearly, one plan can – and likely will – impact the other plan. If your retirement plan fails to consider the need to retain sufficient assets to pass down to loved ones, you will use up all available assets and have nothing left at the end of your life to pass down. Because you will stop working at some point, you will eventually depend on existing assets and retirement accounts to support you during your retirement years. Withdrawals from retirement accounts often trigger tax consequences as do the sale or transfer of assets. Failing to understand and plan for those tax consequences could result in a significant loss of assets toward the end of your life. That, in turn, diminishes the value of the estate you leave behind for loved ones when you are gone.
Conversely, if your estate plan ties up the majority of your assets with the intention of passing them down to loved ones, you may be left with insufficient assets and/or income to live comfortably during your twilight years. In an effort to avoid those tax consequences, for example, you might shelter assets in an irrevocable living trust or engage in lifetime giving strategies that do effectively effectuate the transfer of wealth from your estate to your loved ones; however, it may leave you struggling to pay the bills during your Golden Years. By the same token, your existing estate assets could be at risk if you find yourself facing the need to pay a costly long-term care bill and you failed to include Medicaid planning in your estate plan. The bottom line is that neither your retirement plan nor your estate plan should exist in a vacuum because one of your goals is almost certain to fail as a result.
The only way to avoid both of these unwanted results is to integrate your retirement planning objectives into your comprehensive estate plan to make sure that both plans work in harmony with each other.
Contact Vero Beach Estate Planning Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns regarding retirement planning and/or estate planning, contact an experienced Florida estate planning lawyer at Kulas Law Group by calling (772) 398-0720 to schedule an appointment.