Just a moment ago you were in the thick of your busy, busy Peak Earning Years. Now, you can see a new adventure rapidly approaching. What is it? Retirement.
Are you getting ready?
Chances are good that your children have left the nest. Perhaps you are assisting your aging parents with their personal, health care and financial responsibilities.
As in your Peak Earning Years, this would be a good time to create (or revisit) your estate plan and make sure your adult child(ren) and parents have their legal ducks-in-a-row, also.
Unfortunately, many married couples believe that they can make decisions (whether personal, health-related or financial) for each other should either spouse become unable to do so due to a serious injury or illness. Nothing could be further from the truth!
Without proper advance planning to appoint your spouse as your decision-maker, if you are unable to do so, he or she will not have legal authority to make even fundamental decisions for you (or affecting both of you). For example, medical privacy laws will deny your spouse/partner access to your medical records and the ability to consult with your physician(s), financial laws limit control over your finances, and IRS regulations will prohibit filing a “legal” joint income tax return, just to name a few.
Unless you legally appoint the decision-maker of your own selection in advance through proper estate planning, then a probate judge will select one for you. While the judge will likely appoint your spouse, the probate court process to accomplish this is long, expensive and can be a burden to your spouse/partner.
Did you know that without having a plan in place, your assets may be distributed after death based on broad state laws written for people who do not have their own estate plan? Of course, this very impersonal estate plan written by state lawmakers will likely not reflect your own unique circumstances and objectives for your spouse and assets. In fact, depending on how your premarital assets are titled and how your beneficiary designations are arranged, you may disinherit your own spouse and force your spouse to sue your estate by no fault of your own!
Now, let’s consider something no married couple wants to think about.
What if your spouse or partner or the person you rely on dies before you or your relationship changes?
Without proper legal planning, your ex-spouse (as surviving parent/guardian) would likely be appointed by the probate court to manage the inheritance you leave to your minor child(ren). To make matters worse, what if your child(ren) later predeceases your ex-spouse, and are single and have no children? Who would inherit your assets then? That is right … your ex-spouse, as the next-of-kin of your child(ren).
Chances are you made a few solemn promises to your new spouse on your wedding day. Among them were promises to be there through thick and thin, personally and financially. In the absence of a premarital agreement to maintain separate assets, most spouses in blended families tend to blend their wealth. For example, they title their respective assets in the names of both spouses and also designate one another as the primary beneficiary of their respective retirement plans and life insurance policies.
Warning: If you predecease your new spouse, then you may forever disinherit your own children from your share of such blended wealth! Thereafter, upon the death of your new spouse, your assets may be inherited by your stepchildren, or even by your new spouse’s next spouse and their children. Yes, things can get complicated – and fast!
Regardless of whether children are reared in a traditional nuclear family or in a blended family, great care should be given to protect any inheritance both for and from them. For starters, wealth representing a lifetime of your hard work and thrift can be lost very quickly. In addition to good old-fashioned spending, an inheritance can quickly vanish through divorces, lawsuits and bankruptcies.
What is your plan to pay for long-term care, if you need it?
Have you noticed how expensive the continuum of care is? From in-home assistance to assisted living to skilled nursing the expenses can destroy savings and investments created over a lifetime of hard work and thrift.
As you near retirement, lock-in a long-term care insurance policy(s) while you are still able to physically and mentally qualify. Some versions of coverage only pay if you need long-term care assistance, but others can now do double-duty and turn into life insurance if you do not need such assistance. That is a popular alternative to traditional long-term care insurance.
There is a 70% risk of needing long-term care once you reach age 65. Curiously, 70% of people think they will not be among those 70% needing care (i.e., denial) and 70% of people think Medicare will pay for it (i.e., ignorance)! You do not want to be in that 70% who are in denial, ignorant or both.