Estate planning should include projections of retirement needs

According to the Social Security Administration’s “The Faces and Facts of Disability” publication, nearly one in four American workers will become disabled before reaching retirement age. Serious conditions, in turn, may require long-term care and treatments.

Yet not every disability applicant may qualify under federal assistance programs. Medicare, for example, typically does not cover long-term nursing home care. Medicaid coverage does include nursing home care, but eligibility is dependent on an individual having less than a certain amount of assets.

As an estate planning attorney knows, it may be possible to anticipate retirement needs while preserving some assets for heirs. In addition, it may be possible to transfer assets out of an individual’s control, thus making him or her financially eligible for Medicaid -- provided the transfer was made five or more years in advance. Irrevocable trusts are an example of how property can be removed from an individual’s control.

A new tax law may also help individuals make more proactive choices for their retirement and estate planning needs. Called longevity insurance, the new tax regulation essentially allows a lifetime fixed-income annuity to be held inside a retirement plan. The start date for such annuities is generally between 80 and 85 years of age.

Planning for retirement expenses while preserving enough assets to pass to heirs may seem like a guessing game. For an attorney that focuses on estate planning, however, there are strategies to prepare estimates. An attorney can also ensure that any named beneficiaries on retirement plan documents are up-to-date and included in any big-picture estate valuations.

Source: The Wall Street Journal, “6 ways a new tax law benefits a sustainable retirement,” Robert Klein, July 25, 2014