As a parent you must be thinking of leaving inheritance to children. Isn’t it? Deciding whether to leave an inheritance for your children impacts the amount you save, the retirement plans you choose and how you take qualified retirement plan distributions. However, beyond your desire to leave some wealth to your children (or not), there are some essential personal financial issues to consider. MoneyMindz.com, Best On-Call Financial Advisory Portal gives you an idea about this important topic.
Consider Your Own Income Needs
Some retirees mistakenly give their retirement savings away without considering their own income needs. Before you make gifts to others, it’s important to assess how much to spend on yourself. Be sure to take into account the impact of inflation and taxes and maintain a diversified portfolio of growth and income investments that can help your portfolio keep pace with inflation.
Plan for Rising Healthcare Costs
The biggest risks to your retirement income and your children’s inheritance are unexpected illness and high healthcare costs. Government programs are often of little assistance when it comes to paying for nursing homes and other forms of long-term medical care. Medicare covers nursing-home stay for a very limited period of time, and Medicaid requires that you spend almost all of your own money before it pays for long-term care. You cannot simply transfer assets to family members to qualify for Medicaid, as the program restricts benefits if asset transfers were made several years prior to a nursing-home stay.
Don’t Outlive Your Income
What if you outlive your retirement fund? When you are over 90 years old, your children and grandchildren may celebrate every birthday gratefully. But if you have spent your nest egg they may also be paying some or all of your bills. With longer life expectancies, it’s important to try to manage retirement-plan withdrawals to avoid depleting assets during your lifetime.
Consider the Tax Implications
If you expect to inherit assets from your parents, you may be in a better position financially than someone who does not expect to receive an inheritance. Keep in mind that certain inherited assets, such as stocks and mutual funds, are eligible for favourable tax treatment called a step-up in basis. If you are leaving assets to others, this tax treatment could mean significant savings for heirs.
Choose Investments Wisely
Those with very large estates may expect children to pass inherited assets to grandchildren. A portfolio designed to last multiple generations grows, preserves capital and generates income with investments like growth and income equities and a portfolio of laddered bonds. Inheritors who wish an estate to last several generations should withdraw income only and avoid dipping into principal.
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