Estate Planning

The term estate planning brings to mind, for many people, the rich and famous deciding to whom they will dole out their vast fortunes. While wealthy individuals certainly do need to consider the recipients of their inheritance, estate planning is something for everyone to do. Whether you are a young family with children at home or a retiree living out your golden years, you need to have a written document showing who gets what when you pass away.

There are several reasons to have a will in place as soon as possible. First, your friends and family members will know exactly what they will be inheriting, which cuts down tremendously on fights and bickering after you are gone. You may not think that you have many important or valuable items, but many times those whom you leave behind may find themselves fighting over precious family mementos. While they may not have much monetary value, they have a tremendous amount of sentimental value in the eyes of those who love you.

If you die and do not have a will, your heirs will be required to hire lawyers and pay significant amounts of money as their inheritance is in probate. Having a will shows exactly what you want done, saving this hassle. Also, if you have minor children at home, having a will ensures that they do not become wards of the state. You can state exactly whom you want to take care of them.

Estate planning involves several different things. One of the most obvious parts of estate planning is your will. Wills show what you want done with your property after you pass away. If you do not have a will, the state will decide what to do with any inheritance that you leave behind, and they likely will not decide in the way in which you would have preferred.

Wills are not complicated documents, but it is essential that you file a will according to the laws in your state. Each state is different, and if a law is not followed when you file your will, your potential heirs could contest it, and it could become null and void. A lawyer can help you plan a will that follows the laws in your state.

Wills can be amended any time you wish. You should amend your will if your family situation changes. If you add children to the family or separate from your spouse, your will likely will need to be updated.

One aspect of estate planning that you may not think of is assigning power of attorney. While this does not directly affect your inheritance or property, it does directly affect you. In general, the person to whom you assign power of attorney will take over your financial situation if you become unable to do so. Whether you are incapacitated due to age or an illness, your agent will manage your finances for you.

Choosing the person to name as your agent is important and requires some thought. While you may want to name a close friend or family member, it is crucial to find someone who is good with handling finances. You also want to find someone to name as power of attorney whom you feel you can trust. Unless you are in a situation currently that requires a power of attorney, you will probably want to set up your power of attorney as one that only goes into effect if you are in a situation where you cannot handle your own finances.

If you do not have an agent named in your will and you are in a situation where you need one, the courts will have to appoint your guardian. This means that someone you do not trust could end up in the position of governing your finances. Also, this process will cost your family quite a bit of money. It is far better to name your agent in your will as part of the overall estate planning process.

A living will is another part of estate planning that you will want to consider. Again, this does not have anything to do with who will be inheriting your property, but it does have to do with your future health and well being. A living will is a legal statement that says what you wish to have done if you should need life-sustaining medical intervention in the future.

Living wills are important because they save your family members from the excruciating decision of what to do if you are no longer able to communicate. Making the decision to end life support is never easy, and it is especially difficult if the family is divided on the decision. By outlining exactly what you want done in your will through a living will, you will save your family the heartache that comes when this decision has to be made. You can also name a healthcare agent, similar to the agent named in your power of attorney document, who is given the ability to make decisions concerning your medical care on your behalf.

When you are working through your estate planning decisions, one thing to consider is whether or not you wish to put someone's inheritance in a trust. By putting your property or other assets in a trust, those receiving an inheritance will not have to go to probate. There are several different kinds of trusts you can choose, but in general, they protect your assets and outline exactly how your heirs can access the funds or property you have left to them. Not everyone is qualified to create a trust, however. You have to have a net worth of at least $100,000 to qualify, for instance.

A trust is helpful if you wish to help guide your family after your death. If you set up a trust for your children, for instance, you can dictate that a certain portion of the inheritance is only payable after they graduate college, get married, or turn a specific age. This will keep them from receiving the inheritance all at once, helping to reduce the risk of wasting the money. It will provide them with incentives to pursue an education or other goal you have for them. Also, it eliminates some of the taxes that your loved ones will have to pay on their inheritance.

Many people are surprised when they begin to work through their estate planning to learn that they have the ability to donate to their favorite charities, even after they have died. You can give your favorite charity a lump sum as part of your will. You can even give them an amount of money to be used for a specific purpose. For instance, if you would like to donate a new piano to your family church, you can dictate this in your will.

Another way to donate a portion of your estate to charity is to make a donation to a charitable gift fund or a community foundation. Both these options allow your donation to earn tax-free interest. By selecting the charities you wish to support before you die and naming them in your will, you can continue to do good after you have died. You can also honor those charities that you feel are the most important one last time. You can even set up a trust that is given to your favorite charitable organization. Talking to your lawyer about the best way to set up this sort of plan is important, because you do not want your favorite charity to end up paying too many taxes on the money you have donated.

Other things to consider when working through your estate planning goals are the titles on your property. Whatever you own that you consider an asset has a title of some sort. On your car, it is the title you received when you paid for the vehicle. On your home, it is your deed. The way you hold a title can change how you can assign an inheritance of your property.

For example, if you are married, you might find that several of your belongings and assets have community titles. This means that both your spouse and your own names are on the title. These cannot be assigned as an inheritance until both you and your spouse have passed away. However, property that has only your name on the title needs to be named in your will, even if you intend to pass it on to your spouse.

One option to deal with the title issue is to pass all your property to your spouse. You can create a clause in your will that states that all your personal property will be passed to your surviving spouse. You will want to indicate who is to receive the property if your spouse does not outlive you. This will eliminate some of the problems associated with confusing titles. An estate planning lawyer will also be a helpful asset to help you work through the titles on your biggest assets.

When you are working on your estate planning, you need to be conscious of the effect of taxes on those you are naming in your will. Estate taxes are charged to those whose estates are valued at $2 million or more. If you fall in this income bracket, you will need to consider taxes as part of your overall estate planning. This tax is supposed to disappear in 2010, only to be reinstated in 2011. In 2011 the amount you can leave someone shrinks to $1 million. If you leave more than $1 million to your heirs, they will have to pay taxes on that money. Of course, Congress can enact laws to change this at any time. For this reason, estates that are near the limit need to consider strategies to use to limit the amount of taxes the government can claim.

Often you can eliminate some of the taxes through properly forming a trust to disperse your assets to your heirs. Again, a lawyer is the best person to help you work through this process. It is essential to follow the laws in your state as well as federal laws when creating a will that may be subject to estate taxes.

One of the most important aspects of estate planning is making arrangements for the care of your minor children. Often young parents forget to create a will, and as a result their minor children become wards of the state when the parents unexpectedly die. If you have children in your home who are under the age of 18, you need to name a guardian for them in your will. If you do not, your children will enter the state system. At this time, your family members will begin fighting over who should have the right to care for your children. This is a difficult time for a child, and not caring for their guardianship in your will could make it even more difficult.

Another thing you can do for your minor children is set up a trust fund to handle the inheritance that you leave them. If you have life insurance or other assets in place, you can put these in a trust to help pay for their living and educational expenses if you should die. This would take some of the financial pressure off the guardian whom you name for your children. However, by putting the money in a trust, that guardian would not be able to use the child's money before the child is ready to go to college. Remember, the guardian you put in your will also is given the right to oversee your child's finances, unless you name a financial trustee for your children.