October 30, 2024
Estate planning is a crucial component of any true financial plan. Allworth financial advisor Dan Rausch, CFP®, walks you through three must-ask questions to help with the process.
When was the last time you reviewed your estate plan?
Estate planning often gets pushed to the back burner, but it’s a critical part of your overall financial strategy. While I’m not an estate planning attorney, I work closely with clients who want to ensure that their hard-earned wealth passes on smoothly to their loved ones. Let’s cover three key questions you should be asking as you consider your own estate plan.
Maybe.
Life insurance can play a crucial role in protecting your family, but it depends on your circumstances. If you’re still working and your family depends on your income, life insurance can provide security in case of an unexpected loss. This is especially true if you're the primary breadwinner.
However, if you’re near or in retirement, and your children are financially independent, you might no longer need life insurance. By this stage, the focus often shifts to managing existing wealth rather than replacing lost income. The key is understanding your needs in the context of your overall financial plan. Always talk with your advisor first to determine if life insurance fits into your strategy before sitting down with an insurance agent.
Absolutely, yes.
A will is the foundation of any estate plan. It’s not just about passing along assets; it’s about ensuring your wishes are followed after your death. A properly structured will ensures that your executor is identified, your spouse and children are protected, and your assets are distributed to the right beneficiaries.
However, don’t forget that even with a will, your estate may still go through probate—a sometimes lengthy and costly process. Creating a will now, even if it’s not perfect, gives your family peace of mind and can be updated as needed. One critical point: the beneficiaries on your retirement accounts (IRAs, 401(k)s) supersede those in your will, so be sure to review those designations regularly to ensure they reflect your current wishes.
It depends.
There are two primary types of trusts to consider: revocable living trusts and irrevocable trusts. Revocable trusts can be changed at any time, while irrevocable trusts, as the name suggests, cannot. The benefit of irrevocable trusts is that they offer greater protection from creditors and potential lawsuits and can provide significant tax benefits for larger estates.
Trusts can also be a tool to avoid probate and ensure that assets are distributed according to your wishes. For example, you may not want your 21-year-old to inherit $2 million all at once. With a trust, you can make the distribution conditional—perhaps spread out over time or tied to milestones like graduating from college.
Whether or not you need a trust depends on the size and complexity of your estate. A simple will may suffice for some, but if your estate is more substantial, a trust might be the better option. As always, speak with your financial advisor before working with an estate planning attorney to ensure you’re not sold anything unnecessary.
As of 2024, the SECURE 2.0 Act has brought some important changes, such as raising the age for Required Minimum Distributions (RMDs) to 73 and adjusting thresholds for certain tax benefits,1 which may impact estate plans involving retirement accounts. Additionally, tools like Qualified Charitable Distributions (QCDs) allow individuals aged 70½ or older to donate up to $105,000 per year directly from an IRA to a charity,2 reducing taxable income and satisfying RMD requirements.
Estate planning doesn’t need to be overwhelming. By answering these key questions and regularly updating your plan, you can protect your family and ensure that your wealth passes on exactly as you intend. For more information on how to create an estate plan tailored to your needs, contact us today to schedule a review of your financial situation.
As a certified financial planner with both tax planning and CFO experience, I understand how complex financial situations require an intentional approach. I’m passionate about educating you to make sound decisions because I understand what’s at stake for you. Wealth management is more than choosing the right investments. It also involves deliberately preserving your wealth, so you feel confident in your tax strategy and family estate plan.
1: https://www.fidelity.com/learning-center/personal-finance/secure-act-2
2: https://www.fidelitycharitable.org/guidance/philanthropy/qualified-charitable-distribution.html
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