Most people work their entire lives so they can eventually enjoy a comfortable and stress-free lifestyle. However, there also comes a point where they start thinking about their legacy and how they want to shape it. Integrating asset protection strategies into your financial planning is a way to take control.
Talking about topics, such as death and incapacitation, aren’t easy discussions. No one likes to think about these things, but what happens if you don’t acknowledge them? If you neglect to think about them enough to put a financial plan into place, you don’t get to have a say in what happens to your assets or who gets them.
While they serve different purposes, estate planning and retirement planning can go hand in hand. As you develop a comprehensive estate plan, you save time because you can secure your future and your assets at the same time. Additionally, you create a safety net for your assets while planning a clear succession legacy strategy for your estate.
Including asset protection is vital for both types of financial planning. In this article, we’ll look at some of the specific requirements needed to create a basic estate plan to protect the assets you own.
Who Needs an Estate Plan?
People often believe estate planning is only for the very wealthy who own significant assets.
The reality is anyone 18 years or older should consider doing some level of estate planning, even if, to date, they’ve only accumulated a few assets. Almost everyone can benefit from asset protection strategies to ensure their possessions are distributed as they want them to be.
Additionally, the sooner a young person starts planning for retirement through their investments, the better the chances they can achieve a comfortable and secure retirement, so long as they understand the best ways to invest.
The earlier a young person begins saving, the higher the potential to increase their portfolio. As younger individuals, they can usually afford to mix in some high-risk, high-return investments and, as they grow older, lean more conservative in their investment strategies.
With that being said, it’s never too late to start!
An advisor who specializes in estate planning and transferring assets can help you lay out a plan and determine ways to proactively include provisions for asset protection planning.
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Why Estate Planning is Important for Retirement
Performing estate planning before reaching the age of retirement is essential because you don’t want yourself or your heirs to be subject to costly estate taxes, creditor claims, legal judgments, or property seizures. You’ll also want to include a living will and healthcare directives so your loved ones know how they should speak for you in the event of incapacitation.
Another reason people should strive to do estate planning (and then keep it up-to-date) is to protect their assets from going to unwanted beneficiaries, such as former spouses or other relatives that they do not want to try to claim their assets.
Keep in mind, as with any investment, there is going to be a level of risk (e.g. stock market investments can lose value), but by carefully cultivating a strategy and routinely monitoring it, you can proactively work to reduce the potential for monetary loss.
To achieve peace of mind and ensure a smooth transition for your loved ones, consider the following five tips for an estate plan when creating a financial strategy for your retirement, your legacy, and beyond.
1. Design Your Estate Plan with a Financial Advisor
Working with a professional financial advisor can empower you to develop a customized and comprehensive financial strategy while avoiding common pitfalls. They’ll take into consideration your monetary goals, target date, and balance those with your comfort level for risk-taking.
Fortunately, there are several approaches you and your advisor can take to ensure a firm asset protection planning strategy is in place. For instance, federal law allows exemptions for qualified retirement plans, which means when structured correctly, creditors and others cannot touch them.
In some states, an advisor can help you set up retirement accounts so your home, life insurance benefits, annuities, and some other assets cannot be touched. Trusts are another strategy people often leverage to protect their hard-earned assets.
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2. Leverage Essential Estate Planning Tools
Estate planning is comprised of several different components. The following estate planning checklist is an example of some of the most common steps involved when planning for the distribution of your personal property and how you want decisions made in the event of death or incapacitation.
Last Will and Testament
This legal document will outline your wishes for how your assets will be distributed to your family members, who will care for any minor children, and any other applicable designations.
Trusts
There are several different types of trusts you can create, but the two primary types are revocable and irrevocable trusts.
Trust can play an important role in asset protection planning and obtaining tax benefits.
You can use a free advisor match tool to speak to a professional on the best way to set up your asset protection trusts.
Power of Attorney (POA)
POAs are documents that designate someone to handle your financial affairs and medical decisions (the latter is healthcare directives, aka as a “living will”) in the event you become incapacitated.
This can be one person for both types of directives, or a separate individual can be chosen for each. This ensures your wishes are carried out in a way you prefer in the event you cannot make decisions.
Beneficiary Designations
This document outlines an individual’s preferences when it comes to the distribution of a life insurance policy, retirement accounts, and bank accounts and dictates who will receive any proceeds in the event of death.
Other plans a person can include in their estate planning documents are directives regarding a funeral and burial. Additionally, an executor or representative to handle the estate must be chosen. This individual will close out accounts, pay off debts, distribute assets, and carry out any other final wishes.
3. Follow Key Considerations in Estate Planning
As you create your estate planning documents, take the time to consider various aspects of your life, including any sentimental or valuable property you own.
This way, you can set up the appropriate type of asset protection plan that makes sense for your estate. This should include:
- Personal assets
- Real estate assets
- Cash assets
- Business assets
- Digital assets
- Estate taxes
Other important key considerations include:
- Carefully selecting beneficiaries
- Regularly reviewing your plan
- Updating your plan where relevant (e.g. marriage, divorce, birth of a child, or other changes)
- Determining the right kinds of trusts (if asset protection trust is your preferred course of action)
- Choosing an executor to manage your affairs
- Talking to family members about your plan
4. Avoid Common Estate Planning Mistakes
Avoiding estate planning errors can help keep you on the path to financial success. The following are common mistakes people tend to make:
- Delaying creating a plan
- Not working with a professional financial advisor
- Neglecting to share your plan with your family
- Not updating beneficiaries or reviewing your plan from time to time
- Neglecting to give copies of your estate plan to your executor, a trusted family member, friend, or estate attorney
5. Work with a Financial Advisor for Estate Planning
Many things in life you cannot control, but asset protection planning is something you can take charge of to try to shape your retirement years and your legacy. The first step in protecting assets is to create estate planning documents and consult with legal advisors, financial advisors, and/or an estate attorney.
The estate planning process can be complex, but working with a professional who can guide you through the legal process, probate process, and any of your state’s laws regarding an asset protection strategy is your best bet.
This way, the financial interests of both yourself and your family members can be protected for now and in the future.
Find the Perfect Financial Advisor to Help Plan Your Future
Retirement should be a time of relaxation and enjoying life. By establishing your estate plan and subsequently maintaining it, you can achieve your goal for living the retirement lifestyle you desire while simultaneously shielding assets from undesirable situations and for your legacy planning.
Many people are overwhelmed when they begin the asset protection process. To help simplify the process, why not get matched with an advisor who understands your goals and is ready to help you collaborate and achieve them? Work together with your new advisor to build the financial future you want.
The less time spent researching financial advisors, the more quickly you can get started on your asset protection plan to have a clear path to retirement and your legacy.
*The information provided on this site is for informational purposes only and should not be construed as financial advice. Invested Better does not guarantee the accuracy or completeness of the information provided. Please consult with a licensed financial advisor before making any financial decisions regarding your asset protection planning.
** Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.
