Estate Planning is Not Just for the Rich and Famous
Most Couples and Many Singles Require Some Aspects of Estate Planning To many of us, the term "estate planning" conjures up images of extremely wealthy people paying lawyers huge amounts of money to set up complex trusts and elaborately complicated wills specifying how their riches should be distributed when they die.
"Not something I need," you might be thinking. But think again. Estate planning is not just for the wealthy or the elderly.
In fact, even if your assets are only worth $25,000, some aspects of estate planning are important for you. If you have a blended family or more substantial assets, an estate plan is critical. But it's not as complicated as you think.
An estate plan not only lets you decide who gets what, and gives you the critical mechanism for choosing a guardian for your minor children, it allows you to set things up in a way that minimizes taxes and may prevent your estate from going through a lengthy probate process.
If your estate is worth more than the exemption amount for Federal estate taxes ($1,000,000 in 2006), the amount over that could be taxed at as much as 50%, plus state taxes. To minimize the tax impact on your heirs, you should see an estate lawyer to draw up an estate plan.
For the rest of us, just how much estate planning do we need?
Write a Will
Whether you own a home, a summer cottage, a Porsche 911, and a huge stock portfolio, or simply a car, a computer, and some household furnishings, if you want your property to go to the people that you designate, a will is a must.
Without one, the state will determine who your heirs are and how much of your property each one will receive, regardless of your wishes. The process can be stressful and expensive for your loved ones. A will is also the only way to designate a custodian for your children.
Create a Durable Power of Attorney for Health Care
This document, which can be as simple as a form called "Five Wishes," which you fill out and give to your doctors, lets you name someone to make health care decisions for you if you're unable to, such as whether to use life-sustaining measures to prolong your life if you are terminally ill or unconscious and unable to speak for yourself.
Create a Durable Power of Attorney
If you're physically or mentally unable to take care of your financial matters and make financial decisions on your own behalf, you'll need someone who knows you well and whom you trust to do that for you. The way to do this is through a Durable Power of Attorney.
Consider Setting Up a Trust
Trusts allow you to stipulate how your heirs can spend their inheritance and when they'll receive the money or property you've left to them. Not everyone needs a trust, but if you're not sure, speak to a lawyer who specializes in estate planning.
Consider Giving Gifts While You're Alive
You can give up to $10,000 a year to as many people as you choose without you or them incurring any taxes. Couples can give up to $22,000 ($11,000 each).
Other Tasks
Set up a filing system that includes information on all of your assets and investments, insurance information, will, and other financial documents and make sure the person you named in your Durable Power of Attorney knows where these documents are kept.
When you go through life changes such as marriage, divorce, birth of a child or grandchild, remarriage, or significant changes in your health or financial situation, review your estate planning documents and update them as necessary.
To find an attorney who specializes in wills and estate planning, see the National Association of Financial and Estate Planning. If you prefer to do it yourself, WillMaker software can generate a will (legal in your state), a Durable Power of Attorney, a Durable Power of Attorney for Health care, and other related documents.
"Not something I need," you might be thinking. But think again. Estate planning is not just for the wealthy or the elderly.
In fact, even if your assets are only worth $25,000, some aspects of estate planning are important for you. If you have a blended family or more substantial assets, an estate plan is critical. But it's not as complicated as you think.
An estate plan not only lets you decide who gets what, and gives you the critical mechanism for choosing a guardian for your minor children, it allows you to set things up in a way that minimizes taxes and may prevent your estate from going through a lengthy probate process.
If your estate is worth more than the exemption amount for Federal estate taxes ($1,000,000 in 2006), the amount over that could be taxed at as much as 50%, plus state taxes. To minimize the tax impact on your heirs, you should see an estate lawyer to draw up an estate plan.
For the rest of us, just how much estate planning do we need?
Write a Will
Whether you own a home, a summer cottage, a Porsche 911, and a huge stock portfolio, or simply a car, a computer, and some household furnishings, if you want your property to go to the people that you designate, a will is a must.
Without one, the state will determine who your heirs are and how much of your property each one will receive, regardless of your wishes. The process can be stressful and expensive for your loved ones. A will is also the only way to designate a custodian for your children.
Create a Durable Power of Attorney for Health Care
This document, which can be as simple as a form called "Five Wishes," which you fill out and give to your doctors, lets you name someone to make health care decisions for you if you're unable to, such as whether to use life-sustaining measures to prolong your life if you are terminally ill or unconscious and unable to speak for yourself.
Create a Durable Power of Attorney
If you're physically or mentally unable to take care of your financial matters and make financial decisions on your own behalf, you'll need someone who knows you well and whom you trust to do that for you. The way to do this is through a Durable Power of Attorney.
Consider Setting Up a Trust
Trusts allow you to stipulate how your heirs can spend their inheritance and when they'll receive the money or property you've left to them. Not everyone needs a trust, but if you're not sure, speak to a lawyer who specializes in estate planning.
Consider Giving Gifts While You're Alive
You can give up to $10,000 a year to as many people as you choose without you or them incurring any taxes. Couples can give up to $22,000 ($11,000 each).
Other Tasks
Set up a filing system that includes information on all of your assets and investments, insurance information, will, and other financial documents and make sure the person you named in your Durable Power of Attorney knows where these documents are kept.
When you go through life changes such as marriage, divorce, birth of a child or grandchild, remarriage, or significant changes in your health or financial situation, review your estate planning documents and update them as necessary.
To find an attorney who specializes in wills and estate planning, see the National Association of Financial and Estate Planning. If you prefer to do it yourself, WillMaker software can generate a will (legal in your state), a Durable Power of Attorney, a Durable Power of Attorney for Health care, and other related documents.