Pam Krueger isn’t amassing a small fortune to leave to heirs. However, she does have a beloved niece and nephew that she plans to bequeath something to. But before Krueger decided what her niece and nephew will inherit, she made sure her savings was fortified and her future healthcare costs were covered.
After all, Krueger doesn’t have children who can take care of her when she’s older. She’s well aware she’ll have to self-fund her future healthcare costs. Krueger made sure she had enough money to pursue her dreams of traveling the world.
Unapologetically, Krueger put herself first instead of thinking about her legacy. “I want to be able to rent a place for two or three months in Italy and Greece every year. I want to travel and go to all those bucket list places,” says Krueger, founder and CEO of a Boston-based, SEC-registered fee-only adviser matching platform.
“Why should I be ashamed to say I worked hard? I’m not planning my life around a legacy.”
Krueger isn’t alone. Many clients don’t have children or individuals to whom they plan to leave their estates.
These individuals are left wondering what they can and should do with their estates. “It becomes a value discussion. Do they want to give money to a niece, cousin, or do they want a large amount of the estate to go to charities,” says a senior wealth advisor at Hightower Wealth Advisors.
“Or do they want to leave nothing behind, spending down their entire nest egg?”
Deciding which way to go can be difficult, but Krueger says it should come from a place of strength. She is traveling the world, staying in nice hotels, and enjoying high-end amenities. But she’s also not frivolous.
Krueger has a plan in place and the money to cover any emergencies or future healthcare costs. That’s particularly important given the high price tag for healthcare in retirement. A 65-year-old can expect to spend $165,000 in healthcare and medical expenses, according to Fidelity Investments.
That doesn’t include any unforeseen emergencies or stints in a long-term care facility. “If you don’t have heirs, it probably means you don’t have anyone to rely on for long-term care. What if you go into a long-term care facility?
You have to figure out how you’re going to cover the what-ifs,” she says.
Planning your savings and healthcare
“Once long-term care is set up, you can use your money guilt-free.”
Whether you want to leave your money to charities, loved ones, or spend it, here’s a look at how you can make it happen.
Just because you don’t have children or siblings doesn’t mean you can’t leave your assets to someone you care about. A will and a trust are two common ways to do this. Your will should lay out how you want your assets distributed and to whom.
You can update this whenever you want. Creating a trust is another option. The trust holds the assets, and you control how they are managed and distributed.
The assets go to the beneficiary when you die. With life insurance policies, bank accounts, and retirement savings plans, you can name your friend or family member as a beneficiary directly with the financial institutions. If you want to leave some or all your money to charity, options abound.
There are donor-advised funds, scholarships and grants, direct donations, and a combination of all the above. Donor-advised funds are tax-advantaged charitable accounts that you invest in and have a say in where the asset is donated. You can donate cash, stock, real estate, fine art, and other assets of value.
You get a tax deduction for funding a DAF. Another option is to give while you are living and get a tax break by transferring stocks, cash, or other assets. With cash donations to qualifying public charities, you can deduct up to 60% of your Adjusted Gross Income (AGI).
For donations of long-term appreciated assets, such as stocks, you can deduct up to 30% of AGI. If you are 70-½ or older, you can make tax-free charitable donations from your IRA. For some people, the idea of leaving any money behind is out of the question.
They want to spend it until they’re gone. If that is appealing, Krueger says to make sure to check off all these boxes first: ample savings to cover expenses and emergencies, long-term care paid for, and manageable debt. If you are going that route, it may be a good idea to work with a financial advisor who can help you determine your withdrawal rate.
Estate planning should be part of your retirement, whether you have three children to give your assets to or none. While it may be hard to think about something that is decades away, planning for how your estate will be distributed while you are healthy and of sound mind is the best way to ensure your wishes are honored. If you do nothing and something happens, your assets could end up in probate.
“If you want to support the Humane Society and it’s not listed in your document and it’s not listed as a beneficiary, then it goes to the state courts to decide, and usually that means it goes to next of kin,” says the senior wealth advisor.
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