Estate Planning for Boeing Employees
Estate planning is crucial for ensuring that your assets are distributed according to your wishes. As a Boeing employee, you have special benefits and considerations to take into account when planning your estate. Here's what you should know for your estate planning process.
Key Takeaways
Estate planning ensures your assets are distributed according to your wishes.
Boeing's benefits and stock options can help you optimize your estate planning.
You should regularly update your estate plan to accommodate changes in your finances or the law.
Estate Planning Basics
Estate planning means preparing the proper documents to clarify how you want your assets handled after passing away. Here are the most important elements to know.
1. Will
A will is a legal document that specifies how your assets will be distributed after your death. It allows you to:
Designate beneficiaries for your assets
Appoint a guardian for minor children
Name an executor to oversee the distribution of your estate
Writing a will helps prevent conflict among surviving family members and ensures that everyone is properly taken care of.
2. Trusts
Trusts are legal arrangements where one party (the trustee) manages assets on behalf of someone else (the beneficiary). Trusts can be useful for:
Provide tax advantages and reduce estate taxes
Protect assets from creditors
Avoid probate, which can be time-consuming and costly
There are a few different types of trusts, including revocable trusts and irrevocable trusts.
3. Power of Attorney
A power of attorney is a legal document that allows you to designate someone to make decisions on your behalf if you become incapacitated. There are two main types:
Financial power of attorney: Grants authority to manage your financial affairs, such as paying bills, managing investments, and handling retirement benefits.
Medical power of attorney: Allows someone to make healthcare decisions on your behalf, ensuring that your medical treatment preferences are honored.
Having these documents in place ensures that your affairs are managed according to your wishes if you are unable to do so yourself.
4. Life Insurance
Life insurance can provide financial support to your loved ones after your death. In estate planning, life insurance can be used to cover estate taxes and other expenses, ensuring that your heirs receive the full value of your estate. It can also provide liquidity to pay off debts or support your family.
5. Beneficiary Designations
Beneficiary designations are a crucial part of your Boeing retirement accounts and life insurance policies. These designations will override the instructions in your will, so you’ll want to keep them up-to-date.
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Boeing Benefits and Estate Planning
Boeing employees have access to a range of benefits that can significantly impact their estate planning strategies. The main benefit is the Boeing Voluntary Investment Plan (VIP), also known as the Boeing 401(k) Retirement Plan.
The Boeing VIP is a robust 401(k) plan with a dollar-for-dollar match on all contributions up to the first 10% of your salary. That means you can effectively double your retirement savings for free!
To maximize this benefit for your estate plan:
Ensure you contribute enough to receive the full company match, effectively increasing your retirement savings.
Regularly update your beneficiary designations to reflect any changes in your family situation, such as marriage, divorce, or the birth of a child. Beneficiary designations on retirement accounts typically override instructions in your will, so keeping them current is crucial to ensure your assets go to the intended recipients.
PRO TIP: Sometimes, it makes sense to roll your Boeing 401(k) funds into an IRA. That way, you can consolidate your retirement accounts and potentially access a broader range of investment options.
Estate Planning Tax Considerations
Understanding and planning for both federal and state taxes is crucial for estate planning. By structuring your plans correctly, you can minimize taxes on your assets and leave more for your heirs.
Federal Estate Taxes
The federal estate tax applies to the transfer of assets upon your death. As of 2024, the federal estate tax exemption is $13.61 million per individual, meaning that estates valued below this amount are NOT subject to federal estate taxes. (Needless to say, very few Americans are subject to the federal estate tax.)
State Estate and Inheritance Taxes
State estate and inheritance taxes vary widely and can apply to estates below the federal exemption threshold. To learn more, check the specific tax laws in your state of residence.
Capital Gains Taxes
Capital gains taxes apply to the sale of assets that have appreciated in value. In estate planning, consider the following strategies to manage capital gains taxes:
Step-up in basis: Upon death, the cost basis of appreciated assets is "stepped up" to their fair market value. This step-up can eliminate capital gains taxes on the appreciation that occurred during the deceased's lifetime. For example, if you purchased Boeing stock at $100 per share and it’s worth $200 per share at your death, the basis would be stepped up to $200 per share, potentially eliminating $100 per share in capital gains.
Gifting appreciated assets: Gifting appreciated assets during your lifetime can transfer the capital gains tax liability to the recipient. If the recipient is in a lower tax bracket, this can result in overall tax savings.
Income Taxes on Retirement Accounts
Retirement accounts such as 401(k)s and IRAs are subject to income taxes upon withdrawal. Estate planning can help manage these taxes.
Required minimum contributions (RMDs): Beneficiaries of inherited retirement accounts must take RMDs, which are subject to income tax. Proper planning can help manage the tax impact on beneficiaries by spreading distributions over several years.
Roth conversions: Converting a traditional IRA to a Roth IRA can provide tax-free growth and withdrawals for beneficiaries, though the conversion itself is a taxable event. This strategy is beneficial if you expect to be in a lower tax bracket at the time of conversion than your beneficiaries will be during their withdrawals.
PRO TIP: The Boeing Mega Backdoor Roth program makes it easier than ever to convert your Boeing 401(k) funds into a Roth IRA!
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Step-by-Step Guide to Estate Planning
1. Assess Your Assets and Liabilities
Start by taking inventory of your assets and liabilities. List all your assets, including:
Real estate
Bank accounts
Investment accounts
Retirement accounts
Life insurance policies
Personal property.
Then identify your liabilities, such as mortgages, loans, and credit card debts. This comprehensive list will help you understand the full scope of your estate.
2. Define Your Estate Planning Goals
Determine what you want to achieve with your estate plan. Decide how you want your assets distributed among your beneficiaries, choose guardians for minor children or dependents, identify any charitable organizations you wish to support, and consider strategies to reduce estate and income taxes for your heirs.
3. Create the Most Important Documents
Work with an estate planner to create the necessary legal documents.
Draft a will that outlines your wishes for asset distribution, guardianship, and the appointment of an executor.
Set up trusts if needed to manage and protect your assets.
Establish financial and medical powers of attorney to designate who will make decisions on your behalf if you become incapacitated.
Create an advance healthcare directive (living will) to outline your medical treatment preferences.
PRO TIP: Keep all your estate planning documents organized and accessible. Store copies of your will, trusts, powers of attorney, and healthcare directives in a safe and accessible place. Inform your executor, trustees, and family members where to find these documents.
4. Designate Beneficiaries
Review and update beneficiary designations on all relevant accounts and policies. Ensure your 401(k) and IRA beneficiaries are current. Update the beneficiaries on your life insurance policies. Check beneficiary designations for any other accounts that allow them. Beneficiary designations override instructions in your will, so make sure they are always up-to-date.
5. Plan for Taxes
Consider tax implications and strategies to minimize taxes on your estate. Be aware of the federal estate tax exemption and how it applies to your estate. Understand your state’s tax laws and plan accordingly. Utilize strategies such as the step-up in basis to minimize capital gains taxes for your heirs. Consider converting traditional retirement accounts to Roth IRAs to provide tax-free growth and withdrawals for beneficiaries.
6. Share Your Plan
Discuss your estate plan with your family and any designated representatives. Hold meetings to explain your plans and address any questions or concerns. Include your estate planning attorney, financial advisor, and other professionals in these discussions for clarity and guidance.
7. Review and Update Regularly
Regularly review and update your estate plan to reflect changes in your life, finances, and the law. You may want to make adjustments after major life events such as marriage, divorce, birth of a child, or the death of a beneficiary.
And that’s it! Now you’re on your way to a successful estate plan.
TrueWealth Can Help Make Estate Planning Easy!
At TrueWealth Financial Partners, we can help you with all your estate planning needs! We will take the time to understand your unique goals, then create a personalized estate plan for you and your loved ones.
Schedule a free consultation today, and we’ll be happy to assist you in any way we can!
Estate Planning FAQs
What is estate planning?
Estate planning means creating a plan for how your assets will be distributed after your death. It includes drafting legal documents such as wills, trusts, and powers of attorney to ensure your wishes are carried out and your loved ones are taken care of.
Why is estate planning important for Boeing employees?
Boeing employees have unique benefits and stock options that can significantly impact their estate planning strategies. Proper estate planning ensures that these assets are managed and distributed according to your wishes, optimizing tax benefits and providing for your beneficiaries.
How often should I update my estate plan?
You should review and update your estate plan at least once a year, and always after major life events such as marriage, divorce, or the birth of a child. Additionally, changes in your financial situation or tax laws may require updates to your plan.
What are beneficiary designations, and why are they important?
Beneficiary designations are instructions on who will receive the assets in accounts like 401(k)s, IRAs, and life insurance policies. These designations override the instructions in your will, so it’s crucial to keep them up-to-date to ensure your assets go to the intended recipients.
What is a trust, and do I need one?
A trust is a legal arrangement where a trustee manages assets on behalf of beneficiaries. Trusts can offer tax advantages, protect assets from creditors, and avoid probate. Depending on your finances and estate planning goals, setting up a trust may be beneficial.
What is the “step-up in basis,” and how does it impact capital gains taxes?
The step-up in basis adjusts the cost basis of an inherited asset to its fair market value at the time of the original owner’s death. This can eliminate capital gains taxes on the appreciation that occurred during the original owner’s lifetime, potentially saving your heirs a significant amount in taxes.
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