Estate PlanningIntroductionEstate planning requires you to invest your time and effort today to provide for your loved ones in the future. We will focus on steps you can take to protect and transfer your assets to your heirs, before and after you die.
What Is Estate Planning?
Estate planning, simply put, is the collection of steps you need to take to make sure that your heirs are provided for in the best possible way, including lifetime planning as well as disposition of property at death. It may not seem obvious, but your obligations to your family and friends continue even after you die.
Estate planning is carried out with legal documents such as wills and trusts; it typically involves an attorney, and may be very complicated if you have a lot of assets. However, every estate plan should start at the same point: decide who needs your support, and how you want to protect them. As difficult as it is to sit down and plan for the day when you will no longer be here, it is essential and a real show of love for your family and friends.
Why Estate Planning Is So Important
Your obligations to your loved ones do not stop once you die. You may die while you are still providing for a minor child.
You may die with a large amount of assets and debts. If you do not make certain decisions regarding who will take care of your small children or how and who will settle your financial affairs, the courts in your state will make these decisions for you. And they may rule very differently from how you would have chosen. Without proper estate planning, you give up your right to overrule the decisions that other people will make for you in these very important areas. In essence, your ability to plan and protect your loved ones dies when you do.
Remember, estate planning is not just for the wealthy. There are complications to avoid, money to save, and people to protect when each of us die. Estate planning is a critical part of your overall personal financial plan.
Economic Growth and Tax Relief Reconciliation Act
In 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act. This large tax-cut package enacted major changes to federal transfer taxes. The tax-cut package will be implemented over a ten-year period and repeals the estate tax in 2010. Under the law, the estate tax is reinstated in 2011. Rather than repealing both the estate and gift tax, the law retains the gift tax indefinitely, and keeps the estate tax in force until 2009. During this time, the highest gift and estate tax rates are lowered to 45%, while the applicable exclusion amount -- how much you can give away at death without incurring estate tax -- rises incrementally until it reaches $3.5 million in 2009. See the section Estate and Gift Taxes for more information.
Now Is The Time To Act
We hope that you are in good health and not expecting to be face-to-face with death for decades to come.
Unfortunately, death can strike each of us at any time. It is also true that typically, the younger you are, the greater the likelihood that a loved one such as a spouse or child is depending on you. As you read about estate planning, we will focus on the impact that your death will have on your family. This will seem difficult to imagine and other issues may seem more urgent right now. It is common to try to put these issues off until some other time. Do not make this mistake. It is dangerous to put off estate planning until tomorrow, because tomorrow may never come. If you love your family, act now.
HOT TIP: As you are reading about estate planning, you may want to consider how the concepts covered would affect the financial situation of your parents or other loved ones. They may not be aware of all the planning opportunities available. Lead by example. Tell them that you are planning your own estate and then suggest that they consider some of the ideas you are learning about for themselves.
As a result of learning about estate planning, you will:
- Be able to estimate how large your estate is now.
- Know how to develop a list of people you want to leave money or property to when you die.
- Understand why selecting the right guardian for your dependent children is so important.
- Understand why selecting a person you can trust to properly handle your affairs when you die is essential.
- Learn how to minimize the influence the courts will have in your affairs after you die.
- Learn how to avoid making transfers of assets to people who cannot control them effectively.
- Learn how to reduce estate taxes.
- Maximize the amount of money ultimately available for your family.
Article Content by Truebridge, Inc. All rights reserved. Copyright 2001-2010 |
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