At a certain point in life, things begin to get simpler again. Children grow and start out on their own. Thanks to your hard work, your assets have grown substantially, and many of your needs are leveling off or declining. The prospect of retirement, with its own particular appeals and challenges, looms ever larger. At this stage, your estate planning requires attention to ensure proper focus under circumstances that are changing yet again.
Consider the following questions at this stage:
1. Is my estate protected against a debilitating medical condition?
2. Do I need complex estate-tax planning to eliminate or minimize tax liability?
The question of long-term care
Despite low overall inflation, health-care costs have risen explosively in recent years. Medical conditions requiring regular or constant care can wipe out even substantial savings very quickly. In response, insurance companies have offered a product called long-term care insurance, which pays benefits to help defray these costs. Depending on a number of factors, including your net worth, your and your family's medical history, and your desire to preserve assets for bequests after your death, long-term care insurance is worthy of consideration.
Because these products are very complicated, you may want to use independent attorneys and financial planners who specialize in elder care to make sure that a particular product will meet your needs.
Avoiding estate taxes
There have been many attempts in recent years to reduce or eliminate estate taxes. This has made estate planning more challenging, since no one knows what the future will bring. The current consensus seems to be that the estate tax will survive, but with higher exemptions for most estates.
Unfortunately, even the rules under current law change over time. Currently, estates of less than $2 million are exempt from estate tax. The law then raises the exemption to $3.5 million in 2009, eliminates the estate tax entirely in 2010, and then reinstates the estate tax and reduces the exemption to about $1 million in 2011.
The good news is that with basic estate planning, many people can reduce or eliminate the estate tax that might otherwise apply. A combination of trusts, gifts, and other strategies can allow people to take full advantage of the laws that protect smaller estates from taxation.
With estate planning in place to address these considerations, you can enter retirement with confidence that you have taken steps to secure your future.
Are you at a different place in your life from what you're read here? No problem -- our series addresses estate-planning needs for a variety of life stages. Just go back to the beginning and let the links take you where you want to go.
Robert Brokamp of our
Rule Your Retirement
service had an estate plan before graduating from junior high school. If you need help planning your retirement, take Rule Your Retirement for afree trial run today.
Fool contributor Dan Caplinger welcomes your comments.
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