THINK ABOUT ESTATE PLANNING “CHECK LIST”
You may think it’s too soon to do estate planning. Yet, none of us can predict the future – so you’ll want to be prepared for anything.
Where do you begin? Consider developing an estate planning “check list.”
Here’s one to consider:
• Assemble your estate-planning team
Your estate-planning team can include an investment professional, an attorney, a tax professional, an insurance consultant, and you. Use this team to help you complete the following steps.
• Identify your objectives
Your first step is to set out some broad goals, such as these:
•Distribute assets fairly to your family members
•Designate someone to handle your financial affairs if you become incapacitated
•Support charitable, religious or educational institutions
•Name a guardian to take care of your minor children, should you and your spouse die prematurely
• Create a list of all your assets
You’ll need an accurate list of all the assets you own, as well as the registration of these assets and any beneficiary designations associated with them. Ask your investment representative or attorney if he or she can provide a document that will help in organizing this information.
• Create the legal papers you’ll need
Estate planning can involve a variety of legal documents. Here are some of the most common ones:
•Will – Insures that your assets transfer in the manner that you choose.
•Revocable living trust – Assists in distributing assets to beneficiaries, protecting assets, carrying out your wishes if you become incapacitated and minimizing estate taxes.
•Durable power of attorney – Names someone to make financial and health care decisions on your behalf should you become unable to do so.
•Health care directive/living will – Provides evidence of your wishes regarding the administering of life-prolonging procedures when you are no longer able to communicate.
• Estimate estate taxes
Your taxable estate consists of the value of your gross estate – including your savings, investments, real estate, insurance policies, retirement plans, etc. – less any deductions. In 2005, you can pass along up to $1.5 million of your estate, free of federal estate taxes, to your heirs. This estate tax exclusion rises gradually over the next several years.
• Explore ways to reduce estate taxes
Here are a few widely used strategies for lowering estate taxes:
• Gifting – You can give up to $11,000 per year, to as many people as you choose, free of gift taxes.
•Establish “bypass trust” – When created, your assets will “detour” past your surviving spouse’s taxable estate – so you may protect up to $3 million in assets ($1.5 million each in estate tax exclusions) from estate taxes. This figure will rise as the exclusion increases.
•Create “irrevocable life insurance trust” – By putting your life insurance policies into an irrevocable trust, you can avoid estate taxes on the proceeds – which could be a considerable part of your taxable estate.
• Appoint a qualified individual or professional to manage your estate
You’ll need to choose someone who will have the experience, knowledge, time and desire to carry our your wishes and handle your financial affairs.
Get started soon
In a real sense, your estate plan sums up the most important chapters in your life – and you’ll want this story to have a happy ending. So, start the estate planning process soon.
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