Take Care of Loved Ones and Be Sure Your Wishes Are Met
As Florida educators approach retirement, they often focus on maximizing the benefits of the Deferred Retirement Option Program (DROP) to secure their financial future. However, retirement planning extends beyond just accumulating wealth—it also involves preparing for the legacy you leave behind. That’s why estate planning is a vital component of retirement preparation, especially for educators who want to ensure their assets are distributed according to their wishes and their loved ones are taken care of after they’re gone. In the article below, we’ll discuss strategies for navigating your legacy and how your DROP benefits might play a role.
Navigating Your Legacy: Understanding DROP Benefits in Estate Planning
DROP offers Florida educators the opportunity to accumulate additional retirement savings while continuing to work. Upon entering DROP, participants freeze their FRS pension benefit, and their monthly pension payments are redirected into a DROP account, where they accrue interest until they officially retire. At retirement, participants receive a lump-sum payment representing the total value of their DROP account, in addition to their monthly pension benefits. While these funds will likely serve as your “paycheck” in retirement, you can also begin considering how to incorporate them into your estate plan.
When incorporating DROP into estate planning, educators should consider the impact of the lump-sum payment on their overall estate. This substantial payout can significantly increase the value of their estate and may have implications for estate taxes, probate, and asset distribution.
Strategies for Estate Planning with DROP
Even if you’re in good health and likely have a long retirement in front of you, it’s important to get an estate plan in place. Here are practical steps to take as you begin navigating your legacy:
Review and Update Beneficiary Designations: Educators should review and update beneficiary designations on their DROP account, pension benefits, life insurance policies, and other financial accounts regularly. Ensuring beneficiaries are accurately listed can prevent delays and disputes over asset distribution. It’s important to note that your will does not override your beneficiary designations, making it critical to keep them up to date in accordance with your wishes.
Consider Estate Tax Implications: Educators with significant assets, including their DROP lump sum, may be subject to estate taxes upon their passing. Working with a qualified estate planning attorney can help educators develop strategies to minimize estate taxes, such as establishing trusts or gifting assets during their lifetime.
Create a Comprehensive Estate Plan: A comprehensive estate plan goes beyond beneficiary designations and includes a will, power of attorney, healthcare directive, and potentially a trust. Educators should work with legal and financial professionals to create a tailored estate plan that reflects their wishes and addresses their unique financial situation.
Plan for Long-Term Care: Recent data indicates that about 70% of retirees over age 65 can expect to require long-term care services at some point in retirement. These expenses can deplete retirement savings and impact the legacy educators leave behind. Including provisions for long-term care in their estate plan, such as purchasing long-term care insurance or setting aside funds in a trust, can help protect assets and ensure they’re available for beneficiaries.
Navigating Your Legacy: Leveraging Professional Guidance
Navigating estate planning alongside retirement planning, including DROP benefits, can be complex. Educators are encouraged to seek guidance from qualified professionals, such as estate planning attorneys, financial advisors, and tax experts, who can provide personalized advice and assistance tailored to their individual needs and goals.
By integrating DROP benefits into their estate planning strategy, Florida educators can ensure they leave behind a lasting legacy that reflects their values and supports their loved ones for generations to come. Planning ahead allows educators to take control of their financial future and leave a meaningful impact on their families and communities.
Do you have questions about navigating your legacy and how your DROP benefits may play a role? For personalized advice and in-depth planning, schedule a free consultation with the financial professionals at BENCOR DROP support. We look forward to hearing from you!
Please note that PlanMember nor any of its agents or representatives give legal or tax advice. For complete details, consult with your tax advisor or attorney. These policies have exclusions and/or limitations. The cost and availability of Long Term Care insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of Long Term Care insurance. Guarantees are based on the claims paying ability of the insurance company.
