Retirement insights from a Colorado PERA perspective

Issues & Perspectives

Estate Plans: Why You Need One and Where to Start

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There are so many reasons to put off estate planning. Maybe one of these sounds familiar:

  • I’m too young to think about this
  • Sounds like something you do if you’re rich—and I’m not
  • That sounds depressing!
  • It seems complicated, and I don’t know where to start

None of these are good reasons, however.

October is National Estate Planning Awareness Month. Putting the spotlight on estate planning helps clear up a few things:

  • Age has nothing to do with it
  • Your net worth has nothing to do with it
  • Taking control is empowering
  • There are some easy ways to get started

Estate planning means a lot more than deciding who gets your stuff when you die. It means making decisions now that could affect your future—including while you’re very much alive. PERA members can take steps today to make sure their PERA accounts align with their overall plans.

Plan for the Unexpected

Estate planning is an umbrella term. Every component of an estate plan shares something in common: Each one helps make your intentions clear.

Yes, it includes indicating what happens to your house, car, and bank account when you die. But it also includes choosing today who could access your bank accounts and make decisions on your behalf if you couldn’t do it yourself in the future. It states who can make medical decisions for you if you can’t. It also sets limits on the types of decisions your representatives can’t make.

Delegate Financial Decisions

If you are ill or incapacitated, you might want—or need—someone to make decisions on your behalf, including financial decisions.

PERA’s Customer Service team sometimes hears from well-meaning family members who are stepping in to assist a family member who is also a PERA member. Maybe they are trying to help pay bills or transfer a member’s monthly benefit to a new bank account.

However, without proper documentation, even family members are barred from accessing member accounts. Here are ways you can take action now:

  • You might want to allow someone to have access to your financial accounts or with companies that send you bills. The Colorado legislature created a universal power of attorney form anyone can use. It allows you to choose exactly what your representative can and can’t do. This document from the Colorado Bar Association answers a few common questions and includes a copy of the form, beginning on page 9.
  • If you don’t have a power of attorney, your loved ones may have to seek a guardianship or conservatorship in the courts. This can be an arduous process.

After you fill out a power of attorney form, what then? Keep it with your important papers at home? Not exactly.

“If you have a power of attorney form filled out, you might as well give it to PERA,” said PERA Senior Staff Attorney Jennifer Schreck. “You often don’t know ahead of time when you’ll need a representative acting on your behalf, so it’s good to make sure it’s on file as soon as you’ve completed it.”

Keep Your Beneficiaries Current

Choosing beneficiaries for your accounts is an easy way to ensure your assets will be handled the way you want them to be. It’s important to periodically review this from time to time as your preferences or circumstances might change. It’s also important to coordinate your will with your beneficiary designations: If your will says one thing but your beneficiary designations say another, the name(s) listed on your beneficiary forms will supersede whatever your will states.

You have the option to name a beneficiary(s) to your PERA DB account, and you can change this at any time. (Note: PERA survivor benefits go into effect before your named beneficiary).

If you have a 457, 401(k), or Defined Contribution account with PERA, consider reviewing the beneficiaries to these accounts, too. These accounts are not subject to survivor benefits rules.

Delegate Medical Decisions

None of the above forms allow a person to make medical decisions on your behalf or access your medical information. For that, you’ll need a medical power of attorney. Colorado’s legislature has not created a universal form, but you can find a few forms, like this one, available online for free from reputable institutions.

Work with an Attorney

You can fill out the above forms at your kitchen table, provided you sign them in front of a notary public. They lay out your options and let you make decisions via checkboxes. So at what point should you pay for legal expertise?

“I don’t think you need an attorney to create a power of attorney document as long as you’re using the recommended form,” Schreck said. “If you start planning for your estate with a will or trust, however, then you’ll probably want to talk to an attorney.”

Defined contributionA voluntary plan in which participants can save pre-tax income for retirement. Contributions are “defined” by the employee, but the future benefit is not guaranteed.

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Comments

  1. John Huntsman says:

    We have done everything you suggested 15 years ago. We are now 77.

  2. Gordon Kaufman says:

    This article on estate plans is a very timely article and contains valuable information for people who want to feel more secure as they age. I’m so glad that I had a father who shared this information with me a couple of decades ago. Solid retirement and financial information, good decisions (with help from professionals) and financial support through PERA is providing peace of mind to my wife and me as we age together.

  3. D. Esparza says:

    Extremely helpful and timely. I am in the process of making these decisions.

  4. w says:

    This GOOD! Also, PERA would do well to publish guidelines on how to be buried on your own property in CO. A lot of people are doing this now.

  5. Lisa says:

    Defined Contribution…says its pre-taxed and defined by the employee but does not guarantee the benefit? What exactly does that mean?

    • PERA On The Issues says:

      Hi Lisa,
      Defined Contribution accounts include 401(k) and 457 accounts. It also includes the DC Plan that some PERA members can choose as an alternative to the DB plan. In these accounts, members direct their own investments. In these type of retirement accounts, people seek to build up the value of their accounts. In retirement, they are able to determine what their withdrawals look like. However, due to market risk, there is no guarantee as to the size of that account balance or how long it will last in retirement.

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