In my previous post I talked about assessing where you are and planning for succession. In this discussion I want to cover your estate plan and picking the right partners.
The first considerations for retirement planning are your health, lifestyle and any financial obligations. You will use these to determine your required revenue stream.
In addition to qualifying for Social Security benefits, you likely have retirement accounts such as IRAs or 401(k), Keogh, or Simplified Employee Pension (SEP) plans. When tapping these accounts, be sure to avoid actions that could have negative tax consequences. Also bear in mind that minimum distribution rules govern many tax-deferred retirement accounts. Traditional IRAs, for example, compel you to begin taking distributions after age 701⁄2 or face significant penalties.
Also, certain corporate entity formations may provide options for additional distributions and more favorable tax treatments. Consider changing your corporate structure and placing assets where they facilitate the most cost-efficient succession. This is where a professional investment advisor is essential.
Even if you’ve managed your own investments thus far, a financial planning expert and tax advisor can help determine whether your retirement funds are likely to support your plans.
These experts also help you ensure your assets are well diversified in a way that doesn’t put your nest egg at unnecessary risk. A high concentration in one asset, such as your business, could result in a precarious financial situation if the asset were to decline significantly in value.
Protect your estate
Just as important as succession and retirement plans is an estate plan. If you haven’t already, write a will and appoint an executor to oversee the distribution of your assets when you die.
Trusts can help you avoid the costs and inconvenience of probate. Trusts may also protect assets from creditors, provide privacy and come with professional investment management services. Your circumstances — including your assets’ estimated value, their allocation and your beneficiaries — will help determine the structure and tax implications of your ideal trust.
Pick your partners
Planning your exit strategy, retirement revenue and estate distribution isn’t a simple task. At this critical juncture of your life, legal and financial professionals are essential partners.