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Estate planning more complex in certain situations

It doesn't matter how old a couple is or how many assets they have, all couples should spend time on their estate planning. It's never too early to think about wills, trusts and planning for retirement or long-term care.

For Miami-area couples who have a substantial difference in their ages, that planning could prove to be a little more difficult. Why? Well, if each spouse is roughly the same age as the other, they likely will retire at the same time. But what if the two people are, say, 10 years apart? Some financial and estate planning professionals have offered some tips for couples to consider:

  • If a couple has merged their assets, a portfolio should be planned to last throughout the younger spouse's expected lifetime.

When a couple has a gap in their ages, the portfolio also should plan for the older spouse taking payouts at retirement. It is recommended that the portfolio should include a mix of long-term holdings as well as short-term assets, including bonds and cash. The couples should project how much cash will be available in retirement year by year.

  • Take care in receiving disbursements from IRA and retirement plans, such as 401(k) accounts.

If a younger spouse is the beneficiary of the account, it shouldn't be tapped out. The younger spouse might live longer and will need to have funds available years after the older spouse is gone.

  • Make purchasing life insurance and long-term care insurance priorities.

There are many instances when life insurance is especially essential in the cases. For example, where one spouse is older than the other, when the older spouse earns substantially more money or when they have young children or children to put through college.

Long-term care planning is a bit more complex. When people run out means to pay for long-term health care, Medicaid typically kicks in. But what happens when the younger spouse survives and now has no assets remaining? Long-term care insurance can be invaluable when the age gap between two spouses is large so that the younger spouse will have money to live once the other is gone.

  • Maximize the Social Security benefits.

If couples can afford for the older spouse to not draw Social Security until age 70, then don't. Deferring benefits until they reach their peak at age 70 can help the younger spouse receive higher benefits in the future.

Part of a well-oiled estate plan is to account for multiple scenarios. For couples who have unique situations, such as a larger difference in age, it is important to take into account each partner's needs. Hopefully, these tips will provide some insight for couples getting ready to sit down with a professional to establish their estate plan, or even some helpful talking points for couples who would like to update their existing plan.

Source: Morningstar, "Couples' Financial Planning: What to Do When There's an Age Gap," Christine Benz, June 21, 2012

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