Protecting Your Lifestyle: The Importance of Baby Boomer Estate Planning
Baby Boomers represent about 22% of today’s population. Born between 1946-1964, baby boomers are quickly approaching retirement age. In fact, with 76 million boomers on the cusp of retirement, the idea of estate planning is more important than ever. For baby boomers, estate planning does more than pass money and possessions along to their millennial children, estate planning will also protect their lifestyles. Estate planning shapes your end-of-life care and who can make decisions on your behalf.
Many boomers are currently dealing with the passing of their parents and learning lessons about the importance of estate planning. But even with this experience, nearly half of boomers have yet to consider estate planning for themselves.
Who are the Baby Boomers?
The term baby boomer refers to people born after World War II. The dramatic increase in the number of children born after the war was referred to as a baby boom. Boomers are one of the largest generations to date and have a longer life expectancy than previous generations. Today, approximately 80% of the United States’ personal net worth belongs to baby boomers.
Baby boomers have largely shaped American culture, politics, and finances since their birth. Even as this generation reaches retirement age, their influence over the American economy is stronger than ever. Making up a little more than one-fifth of our population, boomers have a significant amount of wealth that they need to plan for. For example, baby boomers:
- Control 70% of disposable income in the U.S
- Have an expected 58% increase in spending over the next 20 years
- Are responsible for 80% of all luxury travel
- Buy more new cars than other generations
- Earn 47% of all income in America
- Are more likely to be business owners
- Nearly two-thirds of boomers intend to work past age 65
- Are expected to inherit $15 trillion over the next 20 years
Despite wielding such significant economic power, many baby boomers are unprepared and tightlipped about their finances. According to research, 42% of baby boomers do not have estate-planning documents.
Why is estate planning important for Baby Boomers?
Death is not pleasant to think about. However, without a plan, it can throw your family into chaos. Baby boomers are the wealthiest generation in history. Further, with the youngest boomers turning 55 in 2019, their wealth is expected to continue to grow over the coming decades. This increase in wealth has led experts to believe that there is an impending increase in the demands for baby boomer estate planning.
Many baby boomers may not consider themselves individually wealthy. However, owning a car, home or simply having money stashed in a savings account means that boomers need to consider estate planning as soon as possible. Estate planning not only covers what happens to your possessions, but it also takes into account health decisions and long-term care.
Estate planning is about more than money
As the generation who created the culture of excess, baby boomers have grown accustomed to a certain lifestyle. More than a transfer of wealth, estate planning will ensure that boomers are able to maintain the lifestyles they’ve created for themselves. While what to do with your financial assets is a major part of estate planning, it is not the only thing you need to consider. Estate planning should include:
What to do with family keepsakes. Family keepsakes are a big deal and can sometimes lead to more fighting and arguments among family members than financial inheritances.
Long-term health care needs. Longer lives and rising health care costs are serious concerns when you are putting together your estate plan. Planning for nursing home expenses that allow you entitlement to federal benefits will ensure that you are cared for in your golden years.
Special needs clause. If you have children or a relative with a disability or special needs, specific plans for care that doesn’t put entitlements to Medicaid benefits in jeopardy is necessary for your estate planning. Long-term care can deplete a lifetime of savings in no time. It’s important that your loved one has access to federal benefits to ensure their care over their lifetime.
How do I start estate planning?
It is difficult to talk to your family about end-of-life planning. But it is important to do this before its too late. The best ways to get the conversation going:
Organize family discussions
You can do this through informal conversations with individual family members or schedule a time to meet with your family at once. It’s best to communicate your estate wishes while you are in good health than to have your family guess if your health deteriorates or after you pass.
Make a list
Find out what each person in your life wants and put it into writing. You can give family heirlooms away through a memorandum or put make it official with a will.
If you have more than one child, it’s best to assume that your children may not be willing or able to share the family property. For example, if you have a home that you are leaving to your children, expect one child to live in it and your other children want to sell it for the money. These types of situations will lead to family turmoil and having a plan in place with your wishes will avoid this.
Give gifts early
If you have items that your family will fight over, but you want a specific person to have, give the gift early. This will keep these items out of the estate and hopefully prevent spats.
Determine your needs
If you have relatives who are irresponsible with money you may want to consider putting their inheritance in a trust rather than a will.
As the children of the silent generation, boomers are, for the most part, beginning to grapple with or have already dealt with settling the affairs of their parents. For this reason, many of them who are in the throws of estate planning are opting for trusts over wills. Both trusts and wills have pros and cons. For example, trusts allow possessions to be transferred to heirs without probate.
Many people incorrectly believe that wills are the only way to pass on an estate to heirs. However, that’s not true. Among estate planning tools, living trusts are gaining popularity with boomers because they avoid costly fees related to the probate processes. Probate is the process that it takes to verify a deceased person’s last will and testament.
Boomers, generally, no longer have to worry about assigning a trusted loved one to be the legal guardian of minor children. However, they do need to consider who will be responsible for the distribution of their property after their death.
Trusts generally cost more money upfront than wills. However, they offer protection against creditors and avoids the months to years long probate process. On the other hand, depending on the type of trust you get set up, it may be subject to taxes.
Designating a power of attorney
Power of attorney is a document that appoints a person or organization to manage your affairs if you are unable to do so. The decisions that a power of attorney can make for you depends on the type of power of attorney you opt for. A general power of attorney can generally handle:
- Financial and business transactions
- Buying life insurance
- Settling claims
- Operating business interests
- Employing professional help
However, a healthcare power of attorney can make medical decisions while or if you are in the hospital and unable to make the decisions yourself.
How often do I need to update my estate plan?
The popular rule is that your estate plan should be updated every three to five years or whenever there is a major change in your life. For example, if your family has welcomed grandchildren into the family, you may want to consider leaving your grandchildren a portion of your estate. Other events that could change your estate planning needs include:
- Receiving a significant sum of money
- Acquiring new assets
- Deciding to leave your assets to a charitable organization
- You want to establish trusts
- A beneficiary passes away
- You move states
These events alone aren’t the only reasons you should consider reviewing your estate plan. Looking at the documents periodically will ensure that your wishes are met.
The Carlson Law Firm can help
As the number of baby boomers estate planning grows, they will need qualified estate planning attorneys on their side. We have a team of experienced, dedicated Texas estate planning attorneys and legal assistants who have nothing but your best interests in mind. They know the importance of estate planning and understand the difficult process of probating a will after a loved one passes.
Contact us today for a free case evaluation, or to schedule an appointment with a Texas estate planning attorney.
- Written by Kazia Conway