Retirement and Estate Planning

Chapter 15

Goals for Chapter 15.1

Describe how your needs will be different at retirement than they are now.

List the features of wills, powers of attorney, trusts, and joint ownership.

Discuss inheritance, estate, and gift taxes.

Defining Your Retirement Needs

How much income do you need?Most financial advisors tell clients that they

will need between 60 and 80 percent of their before-retirement salary to live comfortably when they retire.

Keep the House or Move? Many retirees choose to sell the family home and

find something smaller and easier to maintain. Equity in a house is the property’s value minus the

amount of the mortgage not yet paid. A reverse mortgage is a loan against the equity

in the borrower's home in which the lender makes tax-free monthly payments to the borrower.

What type of Investment Strategy?As you approach retirement, you typically

become more conservative in your investments. Shifting money from stocks to bonds is very common.

What type of insurance?Health insurance is the primary concern.

How do you beat inflation? InvestmentsPart-time work

Estate Planning Tools

An estate is all that a person owns, less debts owed, at the time of the person’s death.

Estate planning is preparing a plan for transferring property during one’s lifetime. Your goals in estate planning should be to

minimize taxes on the estate, to make known how you want your possessions distributed, and to provide for a smooth transfer of your possessions to your loved ones.

Wills

A will is a legal document that tells how you want your estate to be distributed after your death. The executor is a person to carry out the transfer

of your estate. The person who makes the will is called the

testator.

A simple will is a short document that lists the people you want to inherit and what you want each to receive. (pg. 414)

A power of attorney is a legal document authorizing someone to act on your behalf.

A trust is a legal document in which an individual ( the trustor) gives someone else (the trustee) control of property, for ultimate distribution to another person (the beneficiary).