Taking stock of your assets and goals is groundwork for a good estate plan
Few people relish estate planning. After all, deciding how you want your assets distributed after you die can serve as an unnerving reminder that you're not immortal. But there are plenty of reasons to tackle the task with some enthusiasm:
Your first step? Take stock of all your assets. These include your investments, retirement accounts, insurance policies, real estate or any business interests. Next, decide what you want to achieve with those assets and who you want to inherit them. This is also the time to think about people you would trust to handle your affairs and medical decisions in the event that you become incapacitated.
- You get to name the people who you want to have your assets and know that your wishes carry the word of law.
- You can arrange it so that taxes siphon as little from your pot of gold as possible.
- And you have the satisfaction of knowing that your financial affairs are in order and that you're not bequeathing a costly administrative nightmare to your loved ones.
Once you decide what kinds of bequests you want to make, be sure to discuss your plans with your heirs. The sooner and more distinctly you outline your intentions to your family and friends, the less chance there will be for disagreements when you're gone. "If you treat your wealth as a hidden kingdom, a box that no one can open until you're gone, you're setting your family up for disaster," says Norman Ross, vice-president of Hirschfeld, Stern, Moyer and Ross, a New York estate-planning and benefits consulting firm.
|ESTATE TAX EXEMPTIONS INCREASE|
||Estate tax repealed*|
|*Unless a law is passed to extend the estate tax repeal beyond 2010, come 2011 you only will be allowed to leave $1 million to heirs free from federal estate taxes.|
In creating your estate plan, keep in mind that the laws governing estate planning are not set in stone. In fact, the Tax Relief Act of 2001 made several 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; a reduction in the estate and gift-tax rates; and a revision in how the tax basis of inherited assets is calculated. It's a complex law made more complicated by the fact that 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.
What that means is estate planning has become far more complicated for people with sizeable estates, and having a trusted and competent estate-planning lawyer is essential if you wish to protect as much of your assets from Uncle Sam as possible. Such a lawyer can create legal documents, offer advice, keep your estate plan current with new laws and help administer the disposition of assets.
You should also keep handy a good estate-planning reference guide. One top source is Death and Taxes: The Complete Guide to Family Inheritance Planning, by Randell Doane and Rebecca Doane (Swallow Press/Ohio University Press).
|ESTATE PLAN COSTS|
|Basic will plan*:
|Basic trust plan**:
|*Includes a will, a living will, a health-care proxy and a power of attorney. More complex plans may include long-term tax planning as well as provisions for a bypass trust to take effect upon first spouse's death.|
|**Includes all the elements of a basic will plan plus the set-up of a trust. Prices are based on people with net worth up to $5 million. But you may pay more depending on the complexity of the trust.|
|Sources: American Academy of Estate Planning Attorneys fee survey; Roger Levine, Levine, Furman & Smeltzer; Mike Janko, National Association of Financial and Estate Planning; CPA P. Jeffrey Christakos of First Union Securities Financial Network.|
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