|
Q:
What if I have a partner but we're not married?
A: Whether you're part of a mixed or same-sex couple, a will is a must-have document. Without a will, state law will dictate where your property goes after your death. Without a will, your closest relatives may inherit everything.
Another option is to own big-ticket items such as houses and cars together in "joint tenancy" with right of survivorship. Then, when one of you dies, the survivor will automatically own 100% of the property.
Q:
What if I have young children?
A: Having children adds a level of complication to estate planning. Here's what to think about.
1. Write a will. Nothing fancy, just a document that leaves your property to whomever you choose and names a guardian for your children. The guardian will take over if both you and the other parent are unavailable. That's an unlikely situation, but one that's important to address. If you fail to name a guardian, a court will appoint someone, possibly one of your parents.
The other big reason to write a will is that if you don't, some of your property may go not to your spouse, but directly to your children. The problem with the children inheriting directly is that the surviving parent may need to get court permission to spend or invest the money — a waste of time and money in most families.
2. Consider buying life insurance to replace your earnings if you're killed. Term life insurance is relatively cheap, especially if you're young and don't smoke. You can shop for the best bargain online by consulting free services that compare the rates of companies.
Q:
What if I'm 25 and single?
A: What are you doing reading about estate planning? You're supposed to be dancing until dawn. But keep reading — this won't take long.
At your age, don't bother to put a lot of energy into estate planning. Unless your lifestyle is unusually risky or you have a serious illness, you're very unlikely to die for a long, long time.
Q:
What if I'm ill or elderly?
A: Now is the time to take concrete steps to establish an estate plan. Don't wait another moment.
1. The basics: a trust and/or will.
Consider a probate-avoidance living trust and, if you're concerned about estate taxes, a tax-saving trust. (See above. Write a will or update your old one.
2. Power of Attorney
Although no one wants to think about the possibility, at some time, you might become unable to handle day-to-day financial matters or make health care decisions. If you don't prepare for this possibility, a judge may appoint someone to make these decisions for you. No one wants a court's intervention in such personal matters, so make the choice yourself — ahead of when you need it.
You can choose that person yourself, and give him or her legal authority to act for you, by creating documents called durable powers of attorney. You'll need one for your financial matters and one for health care. You choose someone to act for you (called your agent or attorney-in-fact) and spell out his or her authority. You can even state that the document won't have any effect unless and until you become incapacitated.
Once it's signed and notarized, it's legally valid and your mind can be at ease.
3. Directive to Physicians
This legal document tells medical professionals what treatment you want in specific critical situations. The directive form custom-designed by Lynda McMaken received high praise from the Mayo Clinic, where doctors called it, “the best they'd seen.”
Q:
What if I'm middle-aged and have some resources?
A: If you've made it to a comfortable time in life where you've accumulated some wealth and enough wisdom to know that other things matter, too, this is the time to reflect on what you want your legacy to be.
But you may well live another 30 or 40 years, so there's no need to obsess about it. Chances are your conclusions will be different in ten or twenty years, and your estate plan will change accordingly.
So here are several considerations.
1. Avoiding Probate
To save your family the cost (and hassles) of probate court proceedings after your death, consider creating a revocable living trust. It's hardly more trouble than writing a will and lets everything go directly to your heirs, bypassing probate court.
While you're alive the trust has no effect, and you can revoke it or change at any time. But after your death, trust property can be transferred quickly, according to the directions you left in the trust document.
There are other, even easier ways to avoid probate: You can turn any bank account into a "payable-on-death" account simply by signing a form from the bank and naming someone to inherit whatever funds are in the account at your death. You can do the same thing, in almost every state, with securities.
2. Avoiding taxes
If you have enough property to worry about federal estate taxes, consider how much you want to pay in taxes to Uncle Sam and the state.
The amount of tax that will be owed by your estate is a changing number due to frequent revisions by state and federal lawmakers. Documents prepared by this firm will reflect current tax codes.
One way to reduce these taxes is to give away property before your death. If you don't own it, it can't be taxed. An annual gift-giving plan can reduce the size of even a big estate, especially if you have a covey of kids and grandkids. Gifts to your spouse (as long as he or she is a U.S. citizen), direct payment of tuition or medical bills, and gifts to a tax-exempt organization are exempt from gift tax. Keep in mind that annual gifts larger than the current deduction per recipient are subject to gift tax at the same rate as estate tax.
Another way to cut taxes is with trusts. Many older couples use an AB trust to leave property to each other for life, and then to their children. The surviving spouse can spend trust income and, in some circumstances, principal. An AB trust can shield up to twice the exempt amount from estate tax.
Charitable trusts, which involve making a gift to a charity and getting some payments back, can also save on both estate and income tax. There are many other complex trusts; learn about them on your own and then have an experienced estate planning lawyer draw up the documents you want.
3. Directive to Physicians
This legal document tells medical professionals what treatment you want in specific critical situations. The directive form custom-designed by Lynda McMaken received high praise from the Mayo Clinic, where doctors called it, “the best they'd seen.”
|
