Estate Planning Considerations for Retirees

Executive Summary

Join Carson as he presents on how estate planning considerations may impact you when you retire. He shares ideas on what you can do to update your current plan. Follow along with the transcript below.

Welcome to the Webinar (0:00)

Carson Johnson: Okay sounds good, we’ll get started here. So, first off, a little bit about myself, want to introduce me. As you probably already know, my name is Carson Johnson. I’m a Certified Financial Planner™ here at Peterson Wealth Advisors.

I grew up in a small town called Ephraim. For those of you that don’t know where that’s at, that’s in central Utah. If you’ve ever heard of Snow College, that’s where that college is located, where I attended school.

Later after Snow, I graduated from Utah Valley University’s Personal Financial Planning program, nationally ranked program, a really great program that I really enjoyed. And I’ve been in the industry now for seven years and absolutely love it.

I live in Spanish Fork, Utah with my lovely wife Shamri and our two kids. I have a three-year-old boy named Emmett and a little girl named Quinsley who just turned one on Monday and I’m super grateful for them.

So, what I want to talk about today is first, we’ll be going over and debunking certain estate planning myths and misconceptions that are out there. Estate planning has changed over the years and it’s important to see how estate planning applies to you today.

Second, we’ll talk about what is an estate plan.

Third, important estate planning considerations for retirees specifically. Things that you should be thinking about as you make that decision to retire.

And lastly, we’ll summarize what we’ve talked about and I’ll leave you a few questions and action items to help you get started before you meet with an attorney.

A quick disclaimer, the information provided in this webinar does not and is not intended to constitute legal advice. All the information shared, and all the slides is for general information purposes only.

So, let’s get started, shall we?

Myth #1 (1:52)

Myth number one, I am not wealthy enough to need an estate plan. Now one of the many reasons that people fail to create an estate plan or delay in creating one is because they feel that they don’t have the need for one because they don’t have the assets or the wealth to require one.

And in reality, even although the estate planning does talk about the distribution of your wealth, it also addresses other factors such as providing adequate provisions for surviving family members, mitigating family conflicts, helping beneficiaries avoid certain costs such as taxes, and for those that have large enough estates, inheritance, or estate taxes.

It helps you establish healthcare decisions that puts in your control. And if anything, regardless of the size of your estate, healthcare conditions can be one of the most important parts of an estate plan.

And lastly, providing for or supporting a dependent or other people in retirement.

Myth #2 (2:52)

Myth number two, I have a will, so I am covered. A will is a very important document and actually is foundational to an estate plan, but the planning shouldn’t stop there.

There are two main components of a will that I want to briefly talk about. First, a will appoints an executor or personal representative. This person has a huge responsibility. They’re in charge of overseeing your estate and handling everything that happens upon your passing.

Second, a will provides a set of instructions for the distribution of your property upon your death. Not all assets that pass through are covered by a will, and so it’s important to remember that not everything is covered by a will.

Now I briefly want to talk about the property that is not directed by a will.

Some of the property may include joint property where you own a property with another person. Property life insurance accounts, retirement accounts, payable on death designations, which typically deal with bank accounts that are paid to a specific beneficiary upon your passing, and then any property in trust are all categories that pass outside of the scope of the will.

And everything else does catch through the will and goes through what’s called the probate process, which I’ll talk about here momentarily.

So, what is probate? Many of you have either gone through probate or have heard about it and may be wondering, why do we try to avoid it?

Probate is a court-supervised process which transfers ownership of your assets from your heirs upon your death. Probate can be an expensive time-consuming and cumbersome process. And depending on your estate, it could be quite the hassle for your personal representative.

Probate is also very public. So, when your assets go through the probate process and is administered through the court, there’s often news and articles and advertisements describing your estate to the public.

And so, probate is a very, one of the reasons why we try to do estate planning and try to avoid it.

With the proper estate plan, it can reduce the cost and complexity of probate and sometimes even eliminate parts of it from your estate.

Myth #3 (5:17)

Myth number three, my spouse or significant other will immediately receive my assets. I love this question because this comes up quite often.

In connection to a will and talking about the probate process, just like I mentioned, when you die, when you pass away without a will, you are considered what’s called intestate, which just simply means you died without a will.

If this happens, essentially what happens is your will is provided for you through your state’s laws. Your state’s laws are common intestate laws, and the court process determines who inherits your belongings.

And additionally, with that, there might be family members that you want to inherit your belongings but are entirely left out because of the state laws, as this can be particularly important if you have non-traditional families or a mixed family. If you’ve had a divorce and remarried, these are all kinds of examples of where estate planning can be very important and apply.

Now it is fairly common for spouses, especially to have joint property. And like we mentioned before that does pass outside of the will and will bypass the probate process.

But like I mentioned, not all assets are titled as joint ownership. So, another important part of estate planning is understanding where your assets are and how they are owned and what that ownership looks like, whether you own it by yourself, with another person, or multiple people, so that you can understand how that specific property passes on.

What is Estate Planning? (7:02)

All right, now that we’ve debunked a few of the estate planning myths, I want to talk about what estate planning actually is.

Estate planning is a term that has changed over the years. At one point, a long time ago, estate planning was simply having a will, going through the probate process, and if there’s any property that can be owned jointly with your spouse or significant other, then to have an attorney help you do that.

Well over time due to changes to tax law, estate law, changes in finance, and the emerging non-traditional families or simply longevity and retirement has made estate planning far more interesting and frankly more compelling than ever before.

And especially where estate planning can cover many aspects of your life, things like your retirement plan, if you own any businesses, business interests, and planning for the estate planning process for your businesses.

Planning for incapacity, we’ll talk about this here in a moment. But one of the very real risks of retirement is becoming incapacitated, and so we’ll talk about that more in a moment. But it also includes charitable giving strategies and ultimately leaving behind a legacy that ensures that your wishes are being fulfilled.

So, to begin, what is an estate? This might be pretty obvious, but an estate is made up of everything that you own. That includes tangible assets such as your house, automobiles, jewelry, household items, etc. as well as intangible assets: bank accounts, investment accounts, business interests, life insurance, and much more.

Once you have an idea of what your estate and your property looks like, then you can start clearly defining your estate plan in particularly the distribution of these assets, which I talked about a moment ago is just a part of your estate plan.

So, the golden question, what should an estate plan address? An estate plan will be unique to each individual depending on your family dynamics, the size of your assets, your ultimate goals upon your passing.

And so, it’s important to keep in mind some of the clear objectives that estate planning accomplishes.

First is it fulfills your wishes about how property is to be managed or distributed. This might be obvious to everyone, but if you don’t have a proper estate plan, that control over how your property is distributed and passed on is given to the court and you’re putting that into somebody else’s hands rather than your own.

Second is providing liquidity. This is a concept that actually gets overseen quite often. If you think about it, once you pass away and you have considerable expenses that are passed on to your executor, the person that’s in charge of your estate, you might have somebody have them hire a CPA to prepare your final tax return.

You might have final medical bills or even just regular income taxes as well as the traditional funeral expenses that are significant costs. And so having enough liquidity, or funds, to cover those costs is important.

Next is fulfilling your health care decisions. Like I mentioned before, regardless of your estate, this can be one of the most important aspects. And healthcare decisions typically pertain to two things.

One, naming somebody to make general medical decisions on your behalf if you become unable. And two, specifically providing instructions for end-of-life care. So, things like life support can be a great example of end-of-life care needs.

Next is planning for incapacity. Now, this is actually different than the previous bullet point because this can actually be something where you enter in retirement and you become incapacitated, but there’s not necessarily medical decisions being made.

And so you need to make sure you have a plan so that somebody can make those decisions for you that might relate to your financial life or your legal affairs, and so having someone there and a plan in place for them.

Next is maximizing the net amount of assets that are passed on. A good way to think of it with this part is reducing costs. One of those costs is probate costs and hiring an attorney. It could be reducing income taxes. And for those that have large enough estates, it could be reducing estate tax or inheritance tax which can be up to 40% of whatever is passed on.

And so, planning for that, and this is where the creative strategies really come out to play and how it can apply to your property.

And lastly, reducing disagreements and family tensions. This is kind of the byproduct of an estate plan and one of the benefits of doing one.

All right. Now that we’ve talked about the myths, we’ve talked about what an estate plan is, and its common goals, I want to talk about the tools and documents that help us reach those goals.

Basic Estate Planning Documents (12:24)

So first, last will and testament we’ve already kind of gone over this, the new two main components are naming a personal representative, and two providing a set of instructions that describes how your assets are going to be passed on to your beneficiaries for any property that goes through that probate process.

Second is a living trust. A trust is a legal document that allows you to transfer assets into it while you are alive, and once you pass on, it gets passed on to your beneficiaries according to your instructions.

And the important part of a trust document is that it bypasses that probate process. It specifically explains the instructions that you want to leave behind to your future heirs.

Next is a power of attorney. There are lots of different types of powers of attorney, but the main two are a durable power of attorney and a medical power of attorney.

A durable power of attorney allows you to name somebody to make pretty general decisions on your behalf. This can be also very specific to financial decisions, but it allows you to make other decisions, be able to sell real estate if need be on your behalf.

Second is a medical power of attorney as you can see from its name, it allows you to name somebody to make certain medical or health care decisions.

Next is a living will. Living will is a legal document that specifies the instructions you want to leave for end-of-life care needs. So, whether that is having life support or having certain conditions in place to determine when those life decisions should be made, is accomplished through a living will.

And then lastly, appointment of guardian. This is typically a document used when you’re younger, but we occasionally see it in retirement where grandparents are taking care of grandkids, or legally adopting kids, or even taking care of their parents.

And so, having an appointment of guardian is a plan to make sure that your dependents are being cared for.

So, I like to put these documents into these three categories. A will and trust help you distribute the estate.

A power of attorney and living will helps you plan for incapacity. And then appointment of guardian helps you provide for a dependent or someone that you are supporting.

Estate Planning Considerations for Retirees (14:55)

Okay, my favorite part, estate planning considerations specifically for retirees. Estate planning changes as your family changes. This one also may be obvious, but as you go throughout your life your family dynamics change. Whether that be a divorce, or a falling out with a family member, or simply becoming a grandparent which is such an exciting experience.

Your estate planning needs might want to address these different scenarios and definitely needs to be updated, even if you already have an estate plan.

Two, cognitive decline is a very real risk in retirement. According to an article titled ‘Cognitive Impairment in the US’, it states that two out of three Americans experience some level of cognitive impairment by the age of 70.

And in my experience as a financial planner, I’ve seen this quite often and early in my career. And making sure you have a plan in place so that you have somebody to make those decisions, and not having to scramble last minute to try to get one is so important.

Third, retirees may be exposed to greater risk. For example, once you retire a lot of retirees have goals and ambitions to travel more and really have the time of their lives. Traveling presents a risk because you are taking on risk by visiting different countries or different places, or getting hurt. And so, having these documents in place for that can protect you.

Next, estate planning outcomes may vary depending on the state in which you live. We often see with retirees that they like to move. Moving closer to family or into a warmer climate so that they’re more comfortable. And because estate planning is based on your state laws, it’s important that you review how the state in which you live is going to impact your outcomes.

Next is a step up in basis for non-retirement assets. Let me briefly explain what this is. There can be considerable costs by gifting property to your heirs prior to your death.

And what happens once you pass away, non-retirement assets such as a home, or trust investment accounts, or other real estate are some examples, that once you pass away your heirs receive what’s called a step up in basis.

And what that simply means is let’s say you have a home and you bought it for $500,000. And over time it’s grown to $1,000,000 and you have $500,000 of growth.

Once your heirs inherit that and they have a step up in basis, that means they are able to inherit that property at $1,000,000 as the day that they receive it as you pass away. And then they aren’t responsible to having to pay the taxes if they were to sell the home and they are not responsible to pay those capital gains taxes.

And so an important conversation for retirees is looking at your non-retirement assets and seeing what property should be gifted and what property shouldn’t, especially if you have significant gains and in those assets.

And lastly, checking beneficiary designations, if you think about it, beneficiaries are chosen typically at the beginning once you open an account. And for retirees, if they have a 401k that was opened many years ago, 20, 30 years ago, likely your family has changed. Whether you have gotten a divorce or if a child has passed away. It’s so important to review those periodically to make sure that your assets are going to those that you wish to go to.

A quick note. There are other advanced estate planning strategies out there for individuals that have a net worth of right now, 12 million or 24 million for married couples. That’s where estate tax comes into play, and gift tax, and some of these other costs that can reduce the amount of assets that are passed on to your future generations.

If you’re an individual who has a desire to leave a significant amount of assets to a charity, there can be specialized trust strategies, charitable giving strategies that allows you to take tax benefits today and then leave the assets to a charity in the future.

And then caring for special needs children. One of the benefits that special needs children have is being eligible for federal benefits. And those federal benefits are based on income or assets and if these children receive a significant inheritance that could exclude them from these important benefits.

And so these are some examples of other advanced estate planning strategies that you should consider and talk about with an attorney or financial planner.

Summary (19:52)

So in summary, estate planning is more than just the distribution of wealth, but a complete plan for end-of-life decisions and incapacity. A basic estate plan includes a will, trust, a power of attorney, medical power of attorney and a living will.

Three, as you enter retirement, estate planning needs change, and they evolve over time. As your family, as our society evolves laws and our views of finance.

And ultimately, an estate plan ensures that your wishes are being fulfilled. Now I mentioned that there were three myths, I’m gonna give you one more that I often hear which is, I created an estate plan years ago, so there’s nothing left to do.

This is something I hear quite often and it fascinates me because once you have these documents in place. And our lives are constantly changing, and so must our estate plan.

Attorneys, you may be asking how often should I update my estate documents. And attorneys will typically recommend three to five years to make sure that they’re up to date and to laws and fulfilling your wishes.

But if you’ve experienced the loss of a loved one or incapacity, or if you simply move to a new state, these can be excellent times to review your state and make sure it’s following your wishes.

So, what’s next? To help you start the conversation, I want to leave you three questions to start thinking about that will help you start planning this out and how it applies to you.

First, who will look after my financial legal affairs if I’m unable?

Two, who will be responsible to make healthcare decisions for me?

Three, who will be my executor, heirs, and how will my property be distributed, or how do I want my property to be distributed?

These are great questions to help you get started. Clients of Peterson Wealth, if you have questions about what we’ve talked about today, reach out to your advisor and ask them, how do these considerations apply to me?

And we can talk to you more about that or give you a recommendation to an attorney who can help you with estate planning. Anybody else that is interested in these strategies and considerations, feel free to reach out to our office. We’re happy to talk through how your different properties and assets might be passed on to your future generations.

Question and Answer (22:13)

Now, I’ll leave the time for some questions. If you have any Jeff, feel free to jump on if you have any questions that we haven’t got to during the presentation, and we’ll leave the last few minutes for you guys. Thank you.

Jeff Lindsay: Okay, so yeah, just go ahead and put your questions in the Q&A box and we’ll answer those.

One question that came in, what is the difference between a will and a living will?

Carson Johnson: Yeah, great question. So the basic difference between the two is a living will has to do with end-of-life care decisions. So if there’s anything that is going to essentially end your life or prolong your life, that’s what a living will encompasses.

A traditional will, or last will and testament, that has to deal with determining who’s going to be in charge of your estate. And if there’s any property that goes through probate, how will that property be distributed, to who’s your beneficiaries, and who’s going to get what property.

Jeff Lindsay: Okay, a couple questions about your slides came up. Can you show the summary slide? A couple back, and then also if you can go back at some point show the probate versus non-probate as well. While you’re kind of going through that, another question, how long will it really take to complete kind of the estate planning process?

Carson Johnson: Yeah, that’s a great question. So typically what these estate planning meetings look like with an attorney, as you meet with an attorney. They may charge you hourly or they may give you that consultation for free depending on the attorney. And you’ll kind of have a discovery meeting to look at where are all your assets, how are they owned, meaning are they owned in just your name or with the joint owner, etc., what property has beneficiary designations like those investment accounts, life insurance, to get a layout of your estate.

Then the attorney will go and draft the documents and recommend which documents apply to your case. And within, depending on the attorney, if the attorney’s very slammed, it could be a month or two or even longer before you get your documents. But it could be also as quick as two weeks or so for the attorney to get back to you with your legal documents. So, depends on how busy your attorney is.

Jeff Lindsay: Okay, and then can you go on the slides to the probate versus non-probate list? While you’re doing that, another question, what’s the difference between a trust and a living trust, or maybe a revocable versus irrevocable?

Carson Johnson: Yeah, good question. So a living trust just means that you created the trust while you are alive. There’s also what’s called the testamentary trust which is created once you have passed away. That’s your kind of last will and testament. But a living trust is when you’ve created one during your life.

And there’s also two types of trust. There’s what’s called the revocable trust and an irrevocable trust. And ultimately as you can see in the name, irrevocable trust means that once you’ve gifted property into it, you can’t take it back, irrevocable.

And there’s benefits in doing that for estate or inheritance taxes, for example. But ultimately it depends on whether you need an irrevocable trust or not. And it typically depends, it usually has to deal with how big your estate is and if estate tax applies.

And then oh, and on the other part of that revocable trust, revocable means you can take it away. So if you put property into it, you have control over the assets within the trust and you can take the property out of the trust if you want. So, it gives you more flexibility.

Jeff Lindsay: The other slide that somebody wanted you to show is goals of the estate of estate planning. And then a question, what is the typical cost to complete an estate plan?

Carson Johnson: Yeah, so generally if it’s a pretty straightforward estate where you have those main components, those main documents, a will, trust, power of attorneys, living well, and a trust, it generally ranges between $1,500 to $3,000, 3 or $4,000 depending on the complexity.

Now, if you’re one of those kind of situations where you have special needs children or more specialized charitable giving strategies that can definitely be more than that. But I would say a good range is between that $1,500 to $3,000 range.

Jeff Lindsay: Okay, then if somebody already has an estate plan kind of already set up, they’ve already got their trust, how do they make a change in the trust document? Do they have to go to an attorney or can they just attach a notarized document stating the change?

Carson Johnson: Yeah, great question, you’ll definitely want to consult an attorney. So an attorney, what they’ll typically do is they’ll do what’s called, they’ll add a codicil, which is just an amendment to your trust or legal documents. So they’ll still keep what you have, but whatever amendments or changes you want to make, it does need to be done in a legal format. And so that’s done through a codicil and an attorney can help you with that.

Jeff Lindsay: And also, I’ll just add in depending on the state, it might be possible to do it this other way where you’re attaching a notarized document. But if we tell you to do that, then we’re giving legal advice and we’re not attorneys. So, just you would have to either research that out or go to an attorney to double check on that.

Carson Johnson: Yeah, that’s great. Thank you.

Jeff Lindsay: Okay, so another question for those who have underage children, when would it be appropriate not to have your assets and trust to care for your children and instead just leave your trust via a will?

Carson Johnson: Good question, that might be something that is state-related, meaning depending on your state laws where that might matter because the state laws are different in each state. And it could be good in some cases if the probate process and your state laws are, you know, fairly easy and straightforward and that there’s not a huge time or a risk in going through that probate process where a will can be sufficient, but I would talk to an attorney to see if it does make sense to just do a will and kind of not these other estate planning documents.

Jeff Lindsay: So we’re just about a minute over, do you want to keep on Q&A or we can answer these also direct to people?

Carson Johnson: Yeah, let’s take two more questions, and then let me go to the last slide here. And if you still have quite a few questions that you want us to talk about again, you can schedule a consultation or you can send an email to this info@petersonwealth.com email and we’ll get back to you within the next day or two with some responses.

But let’s take the last two questions here.

Jeff Lindsay: So maybe a quick question here, if I plan to sell my home soon in a year or so, is it worthwhile to put it into a trust?

Carson Johnson: Yeah, I would say generally yes. Trusts do, a lot of cases make sense. Especially if you, for example here in Utah, there’s some things that can be taken care of if you have assets less than $100,000. But if you have more than that, then a trust definitely makes sense, especially if you have a home to be able to put your home and other non-retirement assets in the name of a trust, just to avoid that probate process.

Jeff Lindsay: So the point is you might have a plan to sell it in a year, but you pass away in nine months and then you wish your heirs wish you had it in trust right?

And then maybe the last quick question, typical cost for probate versus cost for setting up a trust, and all that kind of comparing the two.

Carson Johnson: Yeah, so if you don’t go through the probate process with an attorney, depending on the state, it could be pretty inexpensive actually. And we kind of made some general terms today of how it might cost, and that probate can be expensive.

And it can be depending on the state, but there are some states, it’s actually a pretty quick and easy process, but if you have to hire an attorney that might cost you between 2 to $4,000 which is about the amount you’re paying for an estate plan anyways.

But if your specific estate is a fairly easy probate process, then you may have some court fees that they have to pay, but that’s pretty nominal in a lot of cases.

Jeff Lindsay: One thing I’ll just mention on, that I’ve had attorneys kind of talk to me about is you can either take care of this before your death and you pay a fairly similar cost to what your kids might pay an attorney after your death.

So it’s just kind of saving them the hassle and the expense of that point too. They might be a pretty similar cost actually.

So I think we’ve kind of come to the end of our time here, but if there are questions that we weren’t able to get to, we’ll reach back out to people and make sure all your questions are answered.

Carson Johnson: Yeah, thanks Jeff. Thanks for everyone for joining, great questions, happy to talk more with everybody, and thanks for your time. Have a great day.

About the Author
Lead Advisor at 

Carson Johnson is a Certified Financial Planner™ professional at Peterson Wealth Advisors. Carson is also a National Social Security Advisor certificate holder, a Chartered Retirement Planning Counselor™, and holds a bachelor’s degree in Personal Financial Planning and a minor in Finance.

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