Successful Estate Planning
If you think that only rich people need to concern themselves with estate planning, think again. It’s important for everyone to have at least a basic estate plan in place, no matter your net worth.
Estate planning allows you to ensure that the right people inherit your assets after you’re gone, along with other important considerations, such as who would handle your financial affairs if you became sick or incapacitated for some reason.
Now admittedly estate planning isn't a task that most people enjoy. It only serves to remind us of our own mortality, and the fact that life really is a short, sweet ride. But it doesn't have to be something to dread, and in fact you'll probably find the process quite painless once you get started.
A successful estate plan has several elements. These
include a will, an assignment of a power of attorney, and a trust. Another
good idea is to have a living will drawn up, a legal document that explains to
medical personnel how you'd like to be cared for if for some reason you're
unconscious or otherwise can't make those decisions for yourself.
Estate planning is too important to put off
The first in successful estate planning is taking stock of all your assets. These include your home and other real estate, investments, 401ks and other retirement accounts, business assets, insurance policies, automobiles, and any other valuables you may own.
Next you need to make the decision of who will get those assets when you're gone. If you have a large family, it can be a challenge to decide exactly who will get what, so that your assets are distributed fairly.
Another important consideration is who will handle your will and other affairs of your estate once you're gone. Choose someone you can trust, who's responsible, and who has the good judgment to handle important decisions on your behalf.
Once you've decided which heirs you'll be leaving your assets to, you need to sit down with them and discuss your estate plans in detail. Many people naturally feel uncomfortable discussing their estate -- and by extension their death -- with members of their family, but you're not doing anyone a favor by remaining silent on such important matters.
There are also important tax considerations when formulating your estate plan. The good news is that the Tax Relief Act of 2001 was a huge tax break for many estates. The Act brought in a series of sweeping changes that are being phased in over a 10-year period.
They include:
- A gradual increase in the estate tax exemption (i.e., the amount of money you may leave heirs free from federal tax) and the eventual repeal of the estate tax.
- The gradual repeal of the federal credit for estate taxes paid to a state government
- A revision in how the tax basis of inherited assets is
calculated.
It's a complex law made more complicated because it sunsets at the end of 2010. Between now and then, Congress may pass other measures that either extend provisions in the Act or eradicate them. - A drop in the gift and estate tax rates -- the top rate will drop to as low as 45% by 2007, which is a whopping 55% reduction from 2001.
If you have a large, complicated estate, you'd probably be wise to hire a good estate-planning attorney. An experience and competent lawyer is essential if your goal is to protect as much of your assets as possible (and keep the government from taking much of it away in the form of inheritance taxes.) A good attorney will offer sound advice, and help you create the necessary legal documents, and even keep your estate plan current as laws change from year to year.
Estate Planning Articles
Please click on the links below to read more about estate planning and other topics of interest..
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