Strategies for your 50s, 60s, 70s and beyond
By Jonathan Bell

From asset building to insurance buying to gifting, your financial needs and actions can — and should — differ dramatically over time, and not simply because your income and asset mix changes as you approach and then reach retirement age. Depending on your age, your financial goals should vary. The following is an age-appropriate guide to help you meet those goals.

Mid-50s to mid-60s
Financial Planning: You are still in asset-accumulation mode. You’re approaching or have already reached your peak earning years and, with any luck, have probably already made your highest expenditures for your children’s education. This could be the time to start paying down debt (especially debt on which the interest is not income tax-deductible) and topping up your retirement savings as much as possible, especially in tax-deferred retirement accounts such as 401(k) plans and IRAs.

You might soon be able to downsize your residence, and invest any excess proceeds in more liquid assets. This may also be the time to consider carefully whether you will buy long-term care insurance and possibly decrease your life insurance costs: Do you need to maintain the same high levels of coverage, given your assets and remaining financial responsibilities to your family?

Estate Planning: Your children may soon finish their educations, so your estate planning for them (after providing for your spouse, of course) should reflect that fact, in my personal view. Depending on their maturity, you could now provide for outright bequests to them rather than provisions in trust. I am not recommending that you distinguish among your children to any great extent in this regard, but suggest that all trusts end at the same age for every child — although you may want to extend that age for everyone because of the child least capable of handling money.

If you have considered estate planning vehicles whose success depends on your survival for a period of years, this is the time to act. These structures include QPRTs — Qualified Personal Residence Trusts — which permit you to transfer, at a discount, a residence your family intends to keep into the next generation. There are also GRATs — Grantor Retained Annuity Trusts — which allow the increase in value of assets above a stated rate of return (the annuity) to pass to younger-generation family members without a transfer tax. You, the grantor, have to live to the end of the trust term for this option to work.

If you haven’t already done so, transfer life insurance you intend to keep until your death into an irrevocable life insurance trust, to keep it out of the taxable estates of you and your spouse. Your children may now be reaching an age when one or more of them (depending on their strengths) could be considered as successor or co-executors and/or trustees to your spouse, as holder of your durable power of attorney, and/or to serve as your heath care proxy. If you can afford it, you might consider helping your children (and their spouses) by making annual gifts to them of $12,000 each and, if you choose, by paying for their children’s education and possibly the entire extended family’s health care (including health insurance). All are tax-free gift transfers which will reduce the size of your taxable estate.

Mid-60s to mid-70s
Financial Planning: You are in “spend-down” mode. You have probably retired with a greatly reduced taxable income, unless you’re lucky enough to have a pension that is a high percentage of your former income. Still, you may not necessarily wish to start drawing down on your retirement account just yet. It is important that you speak with a financial expert who can advise you about the right strategy and sequence of withdrawing from your taxable and non-taxable accounts. If your income and assets other than your residence are low compared with your home’s value, you might consider a “reverse mortgage.” This could be used to pay off debt and/or create a new income stream by taking a loan that need not be repaid until your death, and then only out of the proceeds when your residence is sold.

Estate Planning: You may have grandchildren to consider providing for, keeping in mind that the “generation-skipping tax” adds an extra layer of taxation on gifts exceeding $2 million in the aggregate that pass to any grandchild if their parents (your children) are living when the gift is made. Transfers for grandchildren should almost always be in the form of trusts or custodianships for minors. They should name the parents (not you) as custodian, in order to streamline their administration and prevent their estate taxation at your death.

If your estate plan contains gifts to charity that are effective at your death, you may want to discuss with your estate planner the fact that Congress has passed legislation allowing those over 70 to use IRA assets to make certain charitable contributions without first taking the IRA withdrawals into taxable income. Finally, seriously reconsider which professionals you wish to assist your family in administering your estate after your death. Although we planners are a long-lived bunch, any contemporary of yours will likely have already joined you in retirement or be considering it. You will inevitably be depending on younger folks to take on those roles.

Mid-70s plus
Financial Planning: You might reconsider whether someone should be helping you with your financial affairs, at least periodically making sure you are up to date with things like estimated tax payments and mortgages. If you have a revocable trust as your estate planning vehicle, and I highly recommend them particularly in states with high probate fees and/or intrusive probate courts, you might consider funding it if you haven’t already done so.

This will permit someone to take over your finances if you become unable to maintain them yourself. Of course, this type of help could also be provided under a durable power of attorney, which I also recommend. But again, make sure that your attorney, given his/her age and health prospects, will in fact be better able to handle the job than you can yourself. Finally, consider whether your trust or power of attorney should be written to provide that limited-sized gifts could be made to family members or charities on your behalf.

Estate Planning: Significant changes made in your estate plan at this stage of life may be carefully scrutinized by your family members after death. These are the years in which allegations of incapacity and undue influence are most likely to be made after you are gone. As a result, take extra care when you make revisions in your documents. Make sure you have good reasons to make the changes, and that they are communicated to as many of those affected as possible, without causing total family war.

Keep in mind that if you work out these issues with your family while you are living, they may reap the benefits of greater family harmony after you are gone. You will have provided them with a legacy they can all share that is greater than all the assets you may have accumulated over a lifetime.

Jonathan R. Bell is a partner at Duane Morris LLP. He is a Fellow of the American College of Trust and Estate Counsel. A graduate of Yale College and Harvard Law School, Bell has been practicing as an estate planner for more than 30 years. You may reach him at jrbell@duanemorris.com.