An estate plan has several elements. They include a will; power of attorney; a living will or health-care directive. For many people, a trust may also make sense. When putting together a plan, you must be mindful of both federal and state laws governing estates.
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 etc. Ask yourself three questions: Whom do you want to inherit your assets? Whom do you want handling your financial affairs if you're ever incapacitated? Whom do you want making medical decisions for you if you become unable to make them for yourself?
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 etc. Ask yourself three questions: Whom do you want to inherit your assets? Whom do you want handling your financial affairs if you're ever incapacitated? Whom do you want making medical decisions for you if you become unable to make them for yourself?
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 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. Trusts aren't just for the wealthy. 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 without the cost, delay and publicity of probate court. More importantly, trusts also offer greater protection of your assets from creditors and lawsuits. |
"Laurels don't make much of a cushion." - Dorothy Rabinowitz, American journalist