Monday, July 27, 2009

I have a will, so why do I need an Estate Plan?

Many people mistakenly think that estate planning only involves the writing of a will. Estate planning, however, can also involve financial, tax, medical and business planning. A will is part of the planning process, but you will need other documents as well to fully address your estate planning needs.

Who needs estate planning?
You do—whether your estate is large or small. Either way, you should designate someone to manage your assets and make health care and personal care decisions for you if you ever become unable to do so for yourself.

If your estate is small, you may simply focus on who will receive your assets after your death, and who should manage your estate, pay your last debts and handle the distribution of your assets.

If your estate is large, your attorney will also discuss various ways of preserving your assets for your beneficiaries and of reducing or postponing the amount of estate tax which otherwise might be payable after your death.

If you fail to plan ahead, a judge may be needed to appoint someone to handle your assets and personal care. Your assets then will be distributed to your heirs according to a set of rules known as intestate succession.

Contrary to popular myth, everything does not automatically go to the state if you die without a will. Your relatives, no matter how remote, and, in some cases, the relatives of your spouse will have priority in inheritance ahead of the state.
Still, they may not be your choice of heirs; an estate plan gives you much greater control over who will inherit your assets after your death.

What is included in my estate?
Everything you own is included in your estate. This could include assets held in your name alone or jointly with others, assets such as bank accounts, real estate, stocks and bonds, and furniture, cars and jewelry.

Your assets may also include life insurance proceeds, retirement accounts and payments that are due to you (such as a tax refund, outstanding loan or inheritance).
The value of your estate is equal to the “fair market value” of all of your various types of property—after you have deducted your debts (your car loan, for example, and any mortgage on your home.)

The value of your estate is important in determining whether your estate will be subject to inheritance taxes or estate taxes after your death and whether your beneficiaries could later be subject to capital gains taxes. Ensuring that there will be sufficient resources to pay such taxes is another important part of the estate planning process.

Wednesday, July 22, 2009

10 Good Reasons to have an Estate Plan

No matter your net worth, it's important to have a basic estate plan in place.
An estate plan ensures that your family and financial goals are met after you die. It is a process. It involves people—your family, other individuals and, in some cases, charitable organizations of your choice. It also involves your assets (your property) and the various forms of ownership and title that those assets may take. Overall, it addresses your future needs in case you ever become unable to care for yourself. It is not only for the elderly – even young people are faced with unfortunate circumstances: health related, automobile accidents and so forth.

An estate plan has several elements and considerations.

1)A General Power of attorney or Living Trust can determine:
a)How and by whom your assets will be managed for your benefit during your lifetime if you ever become unable to manage them yourself.
b)When and under what circumstances it makes sense to distribute your assets during your lifetime.

2)A Will or Living Trust can determine:
a)How and to whom your assets will be distributed after your death.

3)A Living Will or Health Care Power of Attorney can determine how and by whom your personal care will be managed and how health care decisions will be made during your lifetime if you become unable to care for yourself.

4)For some, the establishment of a Trust may also be suitable.

What is involved in estate planning?
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. A good place to start is to ask yourself the following questions:
1)What are my assets and what is their approximate value?
2)Whom do I want to receive those assets—and when?
3)Who should manage those assets if I cannot—either during my lifetime or after my death?
4)Who should be responsible for taking care of my minor children if I become unable to care for them myself?
5)Who should make decisions on my behalf concerning my care and welfare if I become unable to care for myself?
6)What do I want done with my remains after I die and where would I want them buried, scattered or otherwise laid to rest?

Once you have some answers to these questions, our office can help you create an estate plan, and advise you on such issues as taxes, title to assets and the management of your estate.

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.

Trusts are not only for wealthy people.
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 with less cost, delay and publicity. Some also offer greater protection of your assets from creditors and lawsuits.

Don’t I only have to discuss my estate plans with my family (heirs) to prevent disputes or confusion?
That would be nice, but upon death emotions rise and there are often hard feelings among those you loved. Inheritance can be a loaded issue and at times full of mixed emotions and even greed. By being clear about your intentions with your loved ones, you may help dispel potential conflicts after you're gone, however, there may be issues you do not wish to speak of. Discussing your true wishes in confidence with your attorney can help provide you with peace of mind.

The federal estate tax exemption
The amount you may leave to heirs free of federal tax - has hit $3.5 million in 2009.
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.

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.

There are two easy ways to give gifts tax-free and reduce your estate.
You may give up to $13,000 a year to an individual (or $26,000 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.

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.