Estate planning covers more than just creating a ‘will.’

Many retirees may not see the need for estate planning. After all, their financial resources are minimal, their home is paid off, and everything they do own will go to the kids with a little left over for their favorite charity.

Don’t die ‘intestate’ (without a will)!

 Retirees often don’t understand the importance of estate planning, especially if they think their financial resources are too minimal to warrant it.

No doubt, if you do have a will, you have included specific instructions on how to distribute your assets and personal belongings. For sure, a will is a critical component to your estate, and most preferable to dying without one. The latter example is called dying intestate, and for Michigan residents, the assets are passed on to your closest relatives; this, as per the state’s “intestate succession” laws.

Obviously, without a will you will not be able to allocate assets, or your belongings to specific family members.

Estate planning is more than just having a will…

But estate planning is more than creating a viable will: it may save your beneficiaries from oodles of taxes by sheltering some of your financial assets. Indeed, it becomes the road map for looking ahead to future cash flows, asset values and withdrawal plans.

Power of attorney

A key component to most any financial plan is the creation of a power-of-attorney (POA). Mistakenly, some might think they are handing over financial decisions to an attorney, once a determination is made that you are mentally incompetent to handle your own affairs.

That is simply not so.

This document exists to give one adult the okay to take care of another adult’s finances, for example. No surprise, but Michigan law requires a written document, one that is signed voluntarily.

So, when you take that trip to Antarctica, you can have your most favorite, and trusted, nephew pay your bills, or make other financial decisions to keep you afloat while you’re gone.

More importantly, the adult who gives the ‘ok’ for another adult to handle their finances must be competent when they sign the document (“And you’re going where?”)

The ‘POA’ is not a health care directive.

A common misperception is that this document allows the signer to make your health care decisions for you when you are unable to perform such duties. Not so.

So, does that mean you should have a ‘Living Will,’ (LW), or advanced healthcare directive?

Michigan does not recognize a LW, or advanced directive, but the law does say it is okay for you to designate a patient advocate as a member of your “health care team.”

Understanding federal estate tax limits

It’s important to approach the estate planning process diligently, beginning with an understanding of the current federal and state exemption limits. For example, in 2015 the new federal estate tax limits pushes the amount an individual can give their heirs without owing federal estate tax to $5.43 million.

Because a retiree’s investment portfolio may include quite a collection of mutual funds, stocks, Treasury bills, etc, it’s imperative to update current beneficiaries. For example, make sure your IRAs, 401(k)s and insurance policies have the correct name and addresses of the beneficiaries.

Living Trusts

Another term for the living trust is the  inter vivos trust—it’s Latin for ‘between the living.’

Specifically, it describes a trust set up by you, the grantor, during your lifetime. And the person, or business, who is ‘holding’ your property, and financial assets, is called the trustee. Again, don’t mistake this trust as a healthcare directive, which Michigan does not recognize—remember to bring in a patient advocate to carry out your healthcare wishes.

Learn more about the intricacies of estate planning, and how important it is to have an experienced hand guiding you through the whole process. Contact us to make an appointment.

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