Cruising into retirement can be an exciting time. After working hard and saving, you’re ready to leave the job world behind and enjoy your golden years. But before you step into the sunset, there are a few crucial steps you should take to make sure your estate plan is bullet proof.
So let’s take a look at some important moves to make right now.
Update Your Will
Things change. Divorces happen, new marriages occur, people pass away, and new children are born. All these life events could have an impact on how your will is structured, so it’s important to review it from time to time. Make sure the designated beneficiaries and asset distribution still align with your wishes.
Appoint a Financial and Medical Power of Attorney
Life is unexpected. And no matter how well you take care of yourself, tragedy can strike at any time. You could become incapacitated, and your financial world can come to a standstill as a result. That’s why it’s important to appoint a legal financial power of attorney. This should be someone you can trust and who is fully capable of managing complex finances.
You should also establish a detailed document that clearly outlines the powers and tasks this individual, known as your agen,t has. To make it official, you would need to fill out and sign state-specific forms while mentally sound. In most states, you would also need sound witnesses to see this singing, and the form would need to be notarized.
The process is similar for medical power of attorney. But you’d want to make sure your agent for medical purposes knows the contact information for all your health care providers. And make sure everyone is in the loop. Over time, look into your power of medical and financial attorney documents and make sure they still align with your wishes. And have conversations with your agents about next steps. Many people do this at least once a year.
Consider a Living Trust
A trust can be a powerful estate planning tool that not only helps you avoid the costly legal process of probate but also ensures your assets are distributed to the right beneficiaries under your terms. And most trusts can take a wide variety of assets, including physical property, cash, and investment accounts. And because the trust would become the legal owner of the assets you transfer into it, a trust can reduce the size of your estate and help you avoid the hefty estate tax down the line.
Take Advantage of Lifetime Gift and Estate Tax Exclusion
Your generosity can go a long way in your lifetime. And gifting can actually be a good tax strategy. This is why it’s important to take advantage of existing tax exclusions.
In 2025, you can give up to $19,000 in assets or cash to an unlimited number of individuals or entities without incurring the gift tax. This is your annual gift tax exclusion. But if you go over these limits, it doesn’t necessarily mean you’d owe a tax. But you’d need to fill out IRS Form 709.
And the amount that goes over the annual exclusion would eat into your lifetime gift and estate tax exemption. For 2025, that stands at $13.99 million. And the lifetime exemption is $27.98 million for married couples. After you go over those limits, you may begin to owe estate taxes. So it’s important to pursue gifting strategies and trust creation with the help of a qualified tax professional.
Update Beneficiaries
The beneficiary designation to accounts like retirement plans actually overrides wills. So you need to make sure the beneficiaries you chose still align with your intentions. In many cases, people get divorced and forget to remove their ex-spouse from beneficiary status. To refresh your memory, here is a list of some accounts that take official beneficiary designation:
- 401(k)
- Roth 401(k)
- individual retirement account (IRA)
- Roth IRA
- insurance policies
- brokerage accounts
Take Required Minimum Distributions
If you have a traditional 401(k) or traditional IRA, your assets can’t stay invested indefinitely. The IRS would eventually require you to start taking required minimum distributions (RMDs). For most people, this will begin at age 73, and you’d be required to take an RMD each year, typically by Dec. 31.
Your RMD is determined by dividing the prior year-end account balance by a life expectancy factor based on IRS tables.
Failure to take your proper RMD can result in severe tax penalties. In most cases, it’ll result in a 25 percent excise tax on the amount you failed to withdraw. However, Roth accounts don’t take RMDs.
Consider a Roth Conversion
You can transfer assets from a pretax retirement account like a traditional IRA into a Roth IRA. You’d be required to pay income taxes on the amount being converted. However, qualified withdrawals would be tax-free as long as you’re at least 59 1/2 years old and the Roth account has been open for at least five years.
But while this sounds beneficial, it may not be the right move for all. A significantly large conversion could increase taxes on your Social Security benefits and raise your Medicaid premiums, so make sure you consult with your financial adviser.
Document Final Wishes
Thinking about your own mortality isn’t the most pleasant move. But you’d want to answer some important questions for your final days. For example, would you like to be buried or cremated? Do you want a small or large memorial service? Or one at all? And how do you want to spend your final days? Perhaps in assisted living? Making this clear in an official document such as a will and medical power of attorney can help your family answer some tough questions and ensure your final days are spent as you would have wished.
The Bottom Line
Before you step into retirement, you may want to check up on your estate plan. Remember to update important documents like wills. Review beneficiaries. Consider establishing a living trust and engage in solid gifting strategies to potentially avoid the estate tax. By taking these and other important moves, you can ensure you leave behind a legacy and your loved ones are taken care of.
The Epoch Times copyright © 2025. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
