Estate planning affects women much more deeply than it does men. Women not only live longer than men on the average, they tend to marry older spouses. This makes women three times more likely to be widowed. Because of this, estate planning is an essential part of retirement planning for women. Because women usually survive longer than their spouses, they commonly have the last say in how much wealth goes to each member of the family, to charity, or to Uncle Sam.
Looking out for Number One
The first thing you should do is appoint someone you trust to act on your behalf should you become disabled, even temporarily. This person becomes a “durable power of attorney.” This is not the same thing as a living will, which addresses end-of-life care, or a health care proxy, which authorizes another person to make medical decisions on your behalf.
Everyone has an estate
You have an estate even if you aren’t rich and you need a plan. Your estate consists of everything you own at death. It includes your home and personal property, investments, bank accounts, retirement plans and whatever interest you may have in a family business. If you haven’t created a will or living trust specifically stating who those assets go to, state law will do it for you.
A will is not the same thing as a living trust
A living trust can take effect either while you’re alive or after death, for example, in case of Alzheimer’s. A will does not take effect until death, and it is used to name guardians for minor children, create trusts that take effect after death, and address assets you haven’t put into a living trust.
Trusts are for everyone
Even if you are not wealthy, a trust can help you achieve your goals. It can protect your assets if you become unable to handle your affairs. It can provide for kids from a previous marriage, hold onto money for minors and prevent funds from being wasted by careless family members. A trust can also shield assets from creditors and former spouses.
Tax breaks for spouses
Inherited or gifted assets from a spouse are not taxed. This is known as the “unlimited marital deduction.” Since 2011, a surviving spouse is now able to add any unused estate tax exclusion of the recently deceased spouse to her own $5 million exclusion. A widow can pass on as much as $10 million, untaxed.
Tax planning for widows is more difficult
For the majority of couples, the main goal is to leave each other financially well off. With the death of the first spouse, tax saving strategies becomes more crucial because the unlimited marital deduction no longer applies. There are nevertheless still a numbers of ways to save taxes while achieving other goals, including helping family members who are less well off, providing for the education of children and grandchildren, and protecting retirement assets.
Don’t keep your own insurance
When you die, your insurance proceeds may be subject to estate tax. It is better to designate a family member as owner of the policy.