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Advisor Perspective

Advisor Perspective

Preparing for Retirement: Estate Planning

Marcus Velasco

Advisor, CPWA®, CFA, CFP®
Marcus enjoys sharing the tools and resources, as well as his experience, that help clients build and stick with their financial plans. Clients know they can count on him to face important decisions in life with confidence and clarity.

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This article is the third of a three-part series on planning for retirement. The first article discussed “Are you Ready” for retirement. The second article, “Making it Last”, discussed maximizing the value of your retirement assets to provide for the retirement you hope to have. Here we will discuss some of the basics of estate planning, including basic estate planning documents, creating a legacy during your lifetime or upon your passing, and maximizing your estate.

Helping Others
Let’s first go over some basic estate planning documents that everyone should have in place. These are not necessarily for your benefit but are to help grieving loved ones understand your intentions and simplify decisions that they may need to make on your behalf.

  • Will details where you want your estate’s assets to go (after debts and taxes are paid) and who is going to oversee the execution of the will. Assets covered by a will may go through probate.
  • Durable Power of Attorney allows someone else, called the attorney-in-fact, to handle your financial affairs when you are not able to do so. This will avoid a court-ordered conservatorship.
  • Health Care Power of Attorney designates who can act as a patient advocate and who makes medical decisions on your behalf.
  • Living Will articulates your wishes about artificial life support.
  • Revocable Living Trust effectively serves as a will, but if funded properly can avoid probate and streamline the estate settlement process.

The titling of an account, such as Joint Tenancy with Rights of Survivorship (JTWROS) and Transfer on Death (TOD), can also be used to simplify the settlement of your estate. This can ease the burden on family and loved ones.

Defining Your Legacy
Though it is a very personal decision, choosing who you want to benefit from your legacy may be difficult. You may prefer to leave your entire estate to your children and family. You may feel that you worked hard and they should too. You may prefer to leave them a portion or none of your estate. You may wish to leave a significant portion of your estate to charities. There is no right or wrong answer on what you want your legacy to be, but we encourage you to think it through and make a conscious decision.

If you are comfortably retired, you may have the ability to pass on a portion of your wealth during your lifetime. This may include helping grandchildren with educational expenses, giving significant gifts to charities that are important to you, or gifting to friends and family. Lifetime giving can allow you to see the impact of your legacy and potentially reduce estate taxes.

Maximizing Your Legacy
Once you have defined your legacy, make sure you are maximizing it. More and more families and individuals are being subjected to the estate tax at the federal level and even in some states. The federal estate exemption is constantly under review and is scheduled to be cut in half in 2026, to approximately $6,000,000. In states with inheritance taxes, the exemption is as low as $1,000,000. In addition, income taxes on inherited IRAs can further reduce the legacy you intend to leave. The impact of these taxes can be minimized through thoughtful tax planning during your lifetime, gifting, and using advanced estate planning techniques.

If you would like to have a conversation about planning for your retirement and legacy, please call your JMG advisor. The contents of this article may or may not be directly applicable to your situation. In either case, we encourage you to pass this along to someone who may find it helpful.

Important Disclosure

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this writing, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this writing serves as the receipt of, or as a substitute for, personalized investment advice from JMG Financial Group, Ltd. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. JMG is neither a law firm nor a certified public accounting firm and no portion of the content provided in this writing should be construed as legal or accounting advice. A copy of JMG’s current written disclosure statement discussing advisory services and fees is available for review upon request.