Developing an estate plan
A person who dies without an estate plan in place is leaving it up to the government or worse, his or her squabbling heirs, to determine the distribution of assets. Also, if a person has not updated his or her estate plan, an heir might unintentionally be left out. Either scenario involves a huge potential for conflict that can, sadly, destroy family harmony. An estate plan empowers you to decide who will be in charge and how your assets will be divided, and also can save your heirs thousands of dollars in death taxes.
While most people understand the need for a will, even if they don't have one yet, many assume that an estate plan is for the rich. Yes, the current exemption for 2005 allows for $1.5 million to be free of taxes under the current tax law, but many middle income people might be surprised to learn how much their estate is worth, especially when you consider rising home values, insurance policies, inheritance, retirement investments, etc. You may have heard that these amounts increase until 2009 (further details), and in 2010 there is no estate tax, but currently the amount returns to just $1 million in 2011 with a respective tax rate of 55% for every dollar over the maximum exemption amount. All of this is subject to the whims of Congress, so who really knows what the future holds, especially for those of us who plan on living well beyond 2011. You should plan on a continuing $1 million exemption and an estate tax bracket of up to 55% for everything over that.
Everyone seems to focus on the tax issues but an estate plan addresses much more. Think about what you want to happen after you die. Ask yourself: Where should my assets go when I'm gone? How can I best protect my spouse and children (or even pets)? Is there someone with special needs, such as a handicapped child or invalid parents, who'll require extra attention? Do I want to leave a gift for a charity or family foundation? What will happen to my small business, and who will run it?
The basic process of estate planning is to ready your estate for the day when it passes to your heirs. A written, detailed plan is the only way to be prepared and ensure that your wishes are carried out. Using an approach like the one presented in this section is a good start toward the development of an estate plan:
Estate planning is one of the most useful tools for protecting your estate and your heirs upon your death. Regardless of your age or amount of wealth, consider getting started and develop a plan. Try the steps in this section and you will learn a lot and be able to develop those parts of your estate plan that you feel are important. At the very least, understand why a will and a living will are so very important, and get those done.
Begin the process of developing your estate plan