BETWEEN 60 TO 70 1/2 WITH ADULT CHILDREN

Planning for the Future

If empty nesters have reached and/or gone by age 60, a thorough and proper review of their retirement planning is necessary. Each type of deferred compensation plan (i.e., IRA, SEPP, 401(k), 403(b), PERS, STRS, etc.) has rules and regulations which govern the withdrawal and the receipt of the account at the participant’s death. These rules should be reviewed both financially and in the retirement and estate planning aspect so that no adverse tax rules apply.

Before attaining 70 1/2, you should review all of your estate planning documents along with those describing financial and retirement benefit planning. Because the age of 70 1/2 has been designated by Congress and the Internal Revenue Code as a lock-up date for certain types of tax-deferred compensation plans, it is imperative that all persons within a year of 70 1/2 review their plans to avoid any income tax and/or estate tax complications. Age 70 1/2 is the trigger when most people must begin making required minimum distributions, or RMDs, from their qualified retirement accounts.

You should prepare a will in conjunction with a living trust, a pourover will, a power of attorney to manage assets, a medical power of attorney to manage health care, an advance directive to physicians (also known as a living will), and a HIPAA release to authorize disclosure of medical information. The living trust avoids a probate estate and also has tax provisions in the event your estate has tax consequences at death. The trust would have provisions for the surviving spouse and would have provisions if no spouse survives for distribution to the adult children and/or grandchildren. Empty nester estate planning becomes more complicated because the children’s lifestyles have been established, and special planning may be necessary in light of the adult child’s capabilities. In some instances, an adult child may be disabled and/or become disabled.  In this event, special trust provisions must be created to avoid the interruption of governmental benefits.  In some cases, the adult child is competent, but may not be one with a great deal of financial responsibility.  This may lead the parent to consider an ongoing trust for protection of the corpus from bad decisions of the child. These matters are thoroughly discussed in estate planning and are tailored to specific client circumstances.

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