Estate PlanningEstate Planning...It's not just for the wealthy anymore. We all enjoy being in the driver's seat and controlling our destiny. Well then what if we further want to control what happens to our personal possessions upon our passing? The answer of course is we need to create an estate plan. With a well constructed plan, you get to spell out all of the details of 1)a will, 2)a durable power of attorney, 3)a living will, 4)a healthcare proxy and possibly 5)a trust. With a plan, you get to choose a guardian for your minor children. With a plan, you can minimize the amount of taxes that are due upon your passing. With a plan, you can prevent your estate from going through a lengthy probate process and the accompanying headaches and expenses for your loved ones. Without a plan (will), the State gets to call the shots. The State dictates who among your heirs gets what! If you want to be certain that all your families needs are taken care of and that your financial goals are carried out according to your wishes, well than an estate plan is just the ticket for you.
By now you are probably wondering how much all this is going to cost? Surprisingly a full package is very manageable. A basic package which includes a will, a living will, a durable power of attorney and a healthcare proxy usually runs from about $1,000.00 to about $1,500.00. If you add a trust into the equation, then you should plan on spending between $2,000.00 and $3,000.00.
As of 2009, federal taxes due on estates valued up to $3,500,000.00 are exempt with the overage subject to tax at the 45% rate. In 2010, the federal estate tax is repealed altogether. Come 2011, most political pundits say that the government will have passed some type of extension or a patch to keep the exemption going because absent that, we will see the exemption drop to the 2002 level of $1,000.000.00 and a 55% tax for the overage. That would be horrible! On a State level there currently are 18 states which collect estate taxes and there are 7 states which impose an inheritance tax on the recipient. Finally, there are 2 states which impose both estate taxes and inheritance taxes (N.J. and MD.) Last Will And TestamentThis is the first part of a well constructed Estate Plan. It allows you to announce to the world exactly what you want to give and to whom. If you die without a will a.k.a. intestate, the State is kind enough to make these decisions for you. Unfortunately, there is a good chance it won't match your wishes. Usually the State will divide your assets between your surviving spouse and your children. Since not too many people actually plan when they are going to die, it would behoove you to create a will and beat the State to the punch.
A prudent person will review their will every so often to update it and incorporate any changes. This is also a good time to review any beneficiaries and make changes to your children's guardianship if appropriate. Believe it or not, approximately twothirds of all Americans DO NOT have a will. Don't become one of them. Durable Power Of AttorneyVery simply, this is a very short instrument that spells out who can make financial decisions for you. This becomes especially critical should you become incapacitated, mentally or physically. Obviously, you must trust him or her implicitly. This person is your "Attorney In Fact" a.k.a. your agent. As such this person has a fiduciary obligation to you, the principal.HealthCare ProxyA Healthcare Proxy is an instrument that allows a person to designate another individual to make healthcare decisions on their behalf should they become incapacitated and are unable to make their own decisions. The most qualified designee should be able to make difficult decisions under stressful situations while keeping your best interests in mind.Living WillA Living Will is an instrument which delineates your wishes regarding the use of life support equipment, should the need arise. If you become unable to communicate, this instrument also known as an Advance Medical Directive or Health Care Directive spells out your interests on the use of or not to use such life prolonging medical treatments and or equipment that would sustain your life.At the top of this page, we talked about at least 4 and possibly 5 estate planning techniques. The fifth one, Trusts, is rather extensive and deserves it's own section. We can go there now by clicking
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