Retirement Planning and Estate Planning: the concepts and differences explained
Nevada is a great place to plan for your retirement and for your estate. Nevada does not have a state income tax. So, while federal taxes will still apply to your income, retirement benefits and social security benefits, you will not pay any incremental state tax on such items to the state of Nevada. In addition, Nevada does not impose an inheritance or estate tax on your estate when you pass away.
Whether you are just starting to think about retirement planning or are more concerned about estate planning, it is important to know the difference between the two and the fundamentals behind them both.
Estate planning focuses on creating legal arrangements to transfer an individual’s estate to their heirs after they pass away. Retirement planning is focused on establishing goals for retirement income and developing plans and strategies to achieve those goals. Making a retirement plan and an estate plan are both incredibly valuable. You can safeguard the interests of your loved ones with a carefully crafted estate plan, and you can also build a substantial retirement fund that will allow you to live with peace of mind throughout your golden years.
There is a close relationship between estate planning and retirement planning. People often have difficulty separating the two. The concept of estate planning refers to a person’s eventual passing or physical or mental incapacitation. In contrast, retirement planning pertains to when the individual settles into retirement or leaves the workforce.
Retirement Planning 101
Plan creators are at the center of retirement planning. The purpose of creating a retirement plan is to ensure that you will remain financially independent after retiring. Without a retirement plan in place, many people are unable to support themselves and end up burdening their loved ones (children or close relatives).
During the time following retirement, your retirement plan must account for the possibility that you will have little to no income. With age, the matter of increasing healthcare costs is an essential element to consider when planning for post-retirement healthcare. You should structure a plan to relieve your kids and close relatives of future healthcare burdens. Everyone’s framework will look a little different, but these are some of the essential elements of planning.
When you are planning to retire, most likely with the help of a financial advisor and an estate planning attorney, you need to answer the more significant questions, such as: What will your lifestyle be like after you retire? Do you intend to downsize your home? Do you plan to travel, or will you be bicoastal? Perhaps you intend to relocate altogether. How old do you aim to be when starting your journey in retirement?
An experienced financial planner, in coordination with a Nevada estate planning attorney, can help you to ensure you have a solid plan to meet your goals for this phase of life.
Estate Planning 101
All the assets that a person controls or owns are considered to be part of their estate. An estate plan specifies how the individual’s property will be divided among heirs and beneficiaries upon the individual’s death. Creating wills and living trusts to address the division and distribution of property are part of the standard practice in estate planning.
When you create a Nevada living trust, the terms of the trust and the assets that are contributed to the trust are determined by you. During your lifetime, you are the beneficiary of the trust, meaning the assets are intended for your use and benefit during your lifetime. During your lifetime, you will also be the trustee of your trust, meaning you manage the trust’s assets. You will also designate a successor trustee who oversees, manages and distributes the assets of your trust to the beneficiaries you have named, after your death.
Protecting your relatives, your assets, and your estate is at the core of estate planning. But estate planning doesn’t only cover what happens after your death, it also addresses what happens should you develop an health problem that leaves you incapacitated.
As part of estate planning, you might also consider special needs planning, legacy planning, asset protection, charitable giving, remarriage protection, and tax planning.
Another aspect of trust-based estate planning is the benefit of avoiding probate. Probate is a court-supervised proceeding that oversees the administration and distribution of your assets after your death. This lengthy process includes paying your creditors, settling your estate, and passing assets to your loved ones either as directed by your will, if you don’t have a will, then by Nevada’s state intestacy laws. If you do not have an estate plan that avoids probate, you should strongly consider one. Your attorney can review with you the ways to avoid probate.
Why do you want to avoid the probate process? One reason is that it is a lengthy and fairly expensive process. If, for example, there is a will contest, the process can take years to complete. Administration costs and legal fees can also add to the strain of the probate process. The probate process is also a public proceeding, meaning anyone with access to a courthouse can learn information about your estate.
Plan or Plan to Fail
Estate planning and planning for your retirement are both crucial. Without a retirement plan, it will make life difficult for you and for those who will have to care for you. Additionally, having no retirement plan means giving up control and freedom in many respects, such as becoming dependent on family members. If an individual doesn’t plan for retirement, it can affect the economic well-being of an entire family. The same goes for estate planning; the effects of not planning your estate can cause a strain for years to come, long after you have passed.
An experienced Nevada estate planning attorney can help you plan for a peaceful retirement, preserve your assets for the future, and keep you in control of how, when, and to whom your assets will pass after your death. Please contact Lee Kiefer & Park for a free consultation, either by using the online form or by calling 702-333-1711.
Attorney Kennedy Lee practices in all aspects of trust and estate law. He views all legal issues from multiple angles (e.g. from litigation to administration point of view) to provide a higher quality of service to our client.