Planning for your estate and retirement seems like something you should handle in your later years, but the truth is you should start the process in your 20s and 30s. You want to be prepared for unexpected emergencies, especially if you have children. Use this guide to help you know and understand your options.
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Write a will
Some find the idea of writing a will too morbid to face, but it’s crucial. If you don’t have a will, your loved ones will have little to no idea what your final wishes are. Unless you’re comfortable writing one yourself, you’ll want to consider finding an estate planning attorney to help you navigate the intricacies of the process.
Next, you’ll want to appoint an executor for your will and estate. This person is usually separate from your attorney; the role of the executor is to carry out your wishes detailed in the will. It should be a loved one that you trust deeply. If you don’t have any close family or friends, you can appoint your estate attorney or a PA (Personal Attorney). You may want to name Allen Gabe Law as your secondary executor in case something happens to your first choice or they are unable to carry out your wishes.
Some items your will should include are:
- • Your assets
- • Your beneficiaries
- • Your debts
- • Guardians for your children
Be as specific as possible when writing your will. If, for instance, your nephew is receiving a trust at the age of 18, specify who will be in charge of it until then. If you want a certain person to scatter your ashes into the ocean, be specific and realistic. Designate an ocean and choose someone you know will follow through.
Get life insurance
Life insurance is an invaluable way to ensure that your family is taken care of should anything happen to you. The more financial dependents you have, the more important life insurance is.
It comes down to two major categories: term life insurance and whole life insurance. Term life insurance covers a set period of time, usually somewhere between five and 20 years. If you pass during this time, your loved ones will receive the payout. If, however, you live past the designated term and don’t renew your policy, there is no payout when you die.
Whole life insurance works differently. It provides lifelong coverage that pays out regardless of when you pass. It’s the most common kind of permanent life insurance even though it’s more expensive than term life. This is a good option for 20- and 30-somethings who will want more protection as they’ve grown and built their lives. You’ll be able to take comfort in knowing that no matter when you die, your policy will payout.
Set up a retirement fund
It’s never too early to plan for retirement, and your company may already have gotten you started. Some companies offer 401(k)s, a special kind of retirement savings account. Money is deducted from your salary and funneled into this account so it can build over time. According to ZenBusiness, “Many employers match at least part of their employees’ contributions to the plans.”
If an IRA isn’t something your company provides, have no fear. An IRA, or Individual Retirement Account, can replace a 401(k). Depending on the kind of IRA you choose, this kind of account lets your money grow on a tax-deferred or tax-free basis.
There are a few different types of IRAs, each one tailored to different requirements and needs.
- • A traditional IRA is tax-deferred, meaning it taxes you on potential withdrawals in the account. However, there is no tax on any portion of the income that you invest, nor does it tax the additional value those investments gain. There are yearly limits to how much money you can contribute each year.
- • A Roth IRA, funded by your (already-taxed) income, is tax-free; this means there are no taxes on withdrawals from the account or on the additional value your investments may gain.
- • A Payroll Deduction IRA is similar to a 401(k) in that it’s set up by your employer. The main difference is that your employer may not necessarily meet the cost of any of your contributions.
- • A Simplified Employee Pension (SEP) is set up by your employer with contributions coming directly from your employer. There are a couple of variations:
- · A SIMPLE IRA Plan is a Savings Incentive Match Plan for Employees arranged by an employer. With this plan, employees may decide to make salary reduction contributions. The employer has the choice of making matching or nonelective contributions.
- · A Salary Reduction Simplified Employee Pension Plan (SARSEP) is a kind of SEP set up by an employer before the year 1997. It includes a salary reduction arrangement.
Consult with an estate attorney to decide what kind of retirement plan is best for you.
Designate a successor for your business
If you’re a business owner, it’s vital to appoint a successor for your business. Ideally, this was already taken care of during your original business planning, but some choose to wait until their company has grown to make this decision.
While naming your successor in ink is a relatively simple and straightforward process, you’ll need to factor in training and preparation. You may choose to train several potential successors at once to see who excels. Once you have a chosen candidate, you should take them under your wing and train them in just about everything you’re trained in — without taking away from their regular responsibilities. The overall objective is to ensure that should the worst happen, your business can continue operating.
Consider also designating someone to help with the succession transition. For example, if your daughter is taking over the business but you think she’ll benefit from partnering up with another manager before taking her new position, say so and name whom. Name a specific amount of time you want the partnership to occur; it can be anywhere from a week to a month to several months, whatever you think is most appropriate.
Spell out every detail of your succession plan on paper. If you have a company lawyer, work with them to ensure you cover every intricacy. Many consider their business to be their baby, so covering this part of your estate planning will be a major comfort.
Estate and retirement planning can be complicated, especially if you opt to do all or most of it on your own. It is, however, absolutely essential. Planning ahead means your loved ones, home, and business will all be taken care of in the event of your passing. Use this guide to help you jumpstart the process. Contact The Law Office of Allen Gabe Law for legal assistance. (847) 241-5000, Ext 121.