30 Dec 2014

Creating a Complete Estate Plan

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We all know you need an estate plan, but 50% of people do not get around to taking the steps to create one. To help you get started here are a few checklist items that will help you get a complete plan in place.
1. Create a will.
In a will, you provide instructions about who you want to inherit your property. You can also name a guardian to care for your young children should something happen to you and the other parent. If you die without a will, your property will pass to your survivors based on your state’s laws of intestacy. Contrary to popular belief, in most states, that means that your spouse and your children will split your legacy. If you are single, your assets will go to blood relatives even if you would have preferred a friend to inherit them.
2. Consider a trust.
If you hold your property in a living trust, your survivors won’t have to go through probate court, a time-consuming and expensive process. A trust is a private document that also allows you to direct how your property should be managed in the event of your mental incapacity or disability. Even if you create a trust, you still need a will to name guardians for your children and to make sure property not in the trust gets into it.
3. Protect your children.
You should also consider protecting your children, minor or otherwise by creating a trust for their benefit in your will or in your trust. That way, you name a trustee to follow your instructions on how to manage and distribute assets to your children in a way that is in their benefit and protects them from creditors and financial predators. The trustee can be a relative, friend, or professional such as a banker or lawyer. If you fail to establish a trust in your will for your minor children, a court will name a guardian to oversee the property they inherit.You should name an adult to manage any money and property your minor children may inherit from you.
4. Review your beneficiaries.
If any of your property is titled in joint names or payable on death, that property will not go through probate or be in your trust. That property will go right through to the beneficiaries. Sometimes this can lead to unintended and unpleasant consequences. It is important to review those beneficiaries to make sure they are current and really reflect your wishes.
5. Make health care directives.
Health care directives include a Living Will (instructions if you are in a vegetative state); a Health Care Power of Attorney (gives someone the power to make treatment decisions if you cannot) and a HIPAA authorization to allow the person you choose to make decisions the authority to see your medical records.
6. Make a financial power of attorney.
With a durable power of attorney for finances,you can give a trusted person authority to handle your finances and property if you become incapacitated and unable to handle your own affairs. The person you name to handle your finances is called your agent or attorney-in-fact (but doesn’t have to be an attorney). States differ dramatically on the legal recognition afforded powers of attorney forms.
7. Consider life insurance.
If you have young children or own a house, or you may owe significant debts or estate tax when you die, life insurance may be a good idea.
8. Understand estate taxes.
Most estates — more than 99.7% — won’t owe federal estate taxes. For deaths in 2014, the individual exemption is $5.34 million. Also, married couples can transfer up to twice the exempt amount tax-free, and all assets left to a spouse (as long as the spouse is a U.S. citizen) or tax-exempt charity are exempt from the tax.For most people this is clearly not a consideration at this time.
9. Cover funeral expenses.
Rather than a funeral prepayment plan, which may be unreliable, you can set up a payable-on-death account at your bank and deposit funds into it to pay for your funeral and related expenses.
10. Make final arrangements.
Make your wishes known regarding organ and body donation and disposition of your body — burial or cremation.
11. Protect your business.
If you’re the sole owner of a business, you should have a succession plan. If you own a business with others, you should have a buyout agreement.
12. Store your documents.
The people you name to take care of your property, whether an attorney in fact, your executor or trustee will need to know about your property and where to access your documents. To avoid making that person spend unnecessary time and effort trying to figure out what to do, consider keeping a folder or notebook with your important documents, a list of your assets and the names and telephone numbers of your professional advisors. Don’t forget to keep a list of your on line accounts and passwords as well. Get a home safe or firebox for these documents and make sure someone else knows where the key or combination is.
13. Leave a letter
Consider leaving your survivors a letter to tell them about your life, your values and thoughts that you would want shared upon your death. This is not a legal document, but a way to express your thoughts and hopes when you are no longer able to do so.
14. Review your Plan
And finally, review your estate plan at least every five years. Make sure all of your documents still reflect your desires, and that your beneficiaries and financial and health care proxies are still willing and able to serve. In addition, you should revisit your estate plan if Congress revises the estate-tax law or whenever there is a major change in your life, such as a birth, death, marriage, or divorce.
14. Don’t do it yourself.
You pay people to prepare your tax returns, paint your house or color their hair, but cannot bring yourself to pay a lawyer to prepare an estate plan for your family. You do not want to spend thousands of dollars on something that you think they can do yourself with will-writing software that sells for less than $100. Well Consumer Reports tested three will-writing products in 2011 with the help of a law professor specializing in estates and trusts. Consumer Reports concluded that all three were inadequate unless a very simple plan was required, such as one that leaves everything to a spouse, with no other provisions. For anything else, you really should use a lawyer. Find one by getting referrals to  lawyers with expertise in estate planning from your accountant or financial planner. Call a few and ask how much they will charge, if anything, to meet with you for an hour and discuss your estate planning needs. After your consultation, some attorneys will quote a flat fee for an estate plan; others bill by the hour and will estimate how much time it will take to draft the legal documents you need.