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> Plan Ahead for Your Estate
 If
there was ever a subject that people try to avoid, it’s planning for the
disposition of their estate after death. But if there was ever something
that you needed to be prepared for, it was making sure your estate is in
order. After all, we don’t know exactly when the day will come that it will
need to be done.
That means your planning needs to take place now, while you are still in
a position to do it. Even if the disposition of your estate ends up taking
place fifty years from now, it is good to know you are prepared.
What if you think you don’t have a high enough net worth to make estate
planning worthwhile? Think again. No matter what amount of wealth you have
accumulated, you need to be prepared.
There are two primary goals with estate planning:
- Make matters as easy for your survivors as possible.
- Make sure your assets end up where you intended them to go.
That means keeping taxes to a minimum and taking the right steps to assure
the proper heirs receive their due.
A place to start – follow these simple steps
Depending on the size of the estate, planning can be a complex task that
involves an attorney and other professionals. But you can get a head start
by following these simple steps.
Question #1 – What are you worth?
Start with an inventory of what your current assets are worth. Include all
of your financial assets (savings, retirement accounts, other investments)
as well as your house and possessions. This will help you understand the
potential size of your estate. If the total value is limited, estate taxes
won’t be a concern. But as it grows, that situation may change.
| Estate Tax Credit on the Rise |
| "Unified Credit Equivalent," representing portion of an individual's estate not subject to taxation upon death |
| Year |
Unified Credit Equivalent |
| 2001 |
$675,000 |
| 2002-2003 |
$700,000 |
| 2004 |
$850,000 |
| 2005 |
$950,000 |
| 2006 |
$1,000,000 |
| Source: Internal Revenue Service |
Question #2 – To whom will it go?
A large percentage of Americans have failed to create even a simple will.* Without a will, the assets of a spouse who dies can pass automatically to the surviving spouse, although this isn’t always the best strategy. Without a will, you could lose control over who inherits your assets. Work with an attorney or, if you are in a "do-it-yourself" mood, use a computer program to create one.
Question #3 – Is documentation in place?
Along with your will, you need to make sure that any pertinent forms that relate to existing accounts are completed in regard to beneficiary designations. That can include your IRAs, workplace retirement plan and even U.S. savings bonds. Make sure those designations are up-to-date and in place.
Question #4 – Are you prepared for tax ramifications?
There’s a lot of talk in Washington about doing away with the estate tax,
but that may or may not happen. In the meantime, you should prepare as
if estate taxes will continue to be an issue. It is possible that, given
enough time, your estate could grow significantly larger than it is today.
There are ways you can protect the value of your estate from the impact
of taxes. For instance, life insurance policies can pay a death benefit
that is designed to cover the cost of estate taxes that may be due. If
you think estate taxes could apply to your situation, you may want to
consider what options are available to minimize the tax impact on your
heirs.
Your estate needs to be reviewed on a regular basis. Proper planning can make a big difference, giving you the peace of mind of knowing that you have done all you can for your loved ones at what can be a very difficult time.
*According to the Wall Street Journal Guide to Planning Your Financial Future, up to 66% of Americans die without a valid will in place.
Content is for informational purposes only and may not accurately reflect your specific situation. Information is not intended to provide financial, legal, tax, or accounting advice. You should consult a qualified advisor for advice specific to your own circumstances.
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