|
Estate Planning (Top 10)
1. No matter your net worth,
it's important to have a basic estate plan in place.
Such a plan ensures that your
family and financial goals are met after you die.
2. An estate plan has several
elements.
They include: a will; assignment
of power of attorney; and a living will or healthcare
proxy (medical power of attorney). For some people,
a trust may also make sense. When putting together a
plan, you must be mindful of both federal and state
laws governing estates.
3. Taking inventory of your assets
is a good place to start.
Your assets include your investments,
retirement savings, insurance policies, and real estate
or business interests. Ask yourself three questions:
Whom do you want to inherit your assets? Whom do you
want handling your financial affairs if you're ever
incapacitated? Whom do you want making medical decisions
for you if you become unable to make them for yourself?
4. Everybody needs a will.
A will tells the world exactly
where you want your assets distributed when you die.
It's also the best place to name guardians for your
children. Dying without a will - also known as dying
"intestate" - can be costly to your heirs
and leaves you no say over who gets your assets. Even
if you have a trust, you still need a will to take care
of any holdings outside of that trust when you die.
5. Trusts aren't just for the
wealthy.
Trusts are legal mechanisms that
let you put conditions on how and when your assets will
be distributed upon your death. They also allow you
to reduce your estate and gift taxes and to distribute
assets to your heirs without the cost, delay, and publicity
of probate court, which administers wills. Some also
offer greater protection of your assets from creditors
and lawsuits.
6. Discussing your estate plans
with your heirs may prevent disputes or confusion.
Inheritance can be a loaded issue.
By being clear about your intentions, you help dispel
potential conflicts after you're gone.
7. The federal estate tax exemption
- the amount you may leave to heirs free of federal
tax - has been rising gradually and will hit $3.5 million
in 2009.
Meanwhile, the top estate tax
rate is coming down. The estate tax is scheduled to
phase out completely by 2010, but only for a year. Unless
Congress passes new laws between now and then, the tax
will be reinstated in 2011 and you will only be allowed
to leave your heirs $1 million tax-free at that time.
8. You may leave an unlimited
amount of money to your spouse tax-free, but this isn't
always the best tactic.
By leaving all your assets to
your spouse, you don't use your estate tax exemption
and instead increase your surviving spouse's taxable
estate. That means your children are likely to pay more
in estate taxes if your spouse leaves them the money
when he or she dies. Plus, it defers the tough decisions
about the distribution of your assets until your spouse's
death.
9. There are two easy ways to
give gifts tax-free and reduce your estate.
You may give up to $12,000 a
year to an individual (or $24,000 if you're married
and giving the gift with your spouse). You may also
pay an unlimited amount of medical and education bills
for someone if you pay the expenses directly to the
institutions where they were incurred.
10. There are ways to give charitable
gifts that keep on giving.
If you donate to a charitable
gift fund or community foundation, your investment grows
tax-free and you can select the charities to which contributions
are given both before and after you die.
At Penney and Associates, we
are committed to providing the best possible service
so your law related needs are handled with the utmost
professionalism.
|
