You will never know how good your estate plan is because you won't be around to see how it works. However, the decisions you make now and how you plan your estate or how you fail to plan your estate will have a tremendous impact on your family for years after your death. Will your estate plan preserve your assets and promote family harmony or will your death force the liquidation of your assets and inflict emotional distress on your family? How these questions are answered will depend on the decisions you make now. To make good decisions, you need to know some basic rules on how to plan your estate. I will outline some general estate planning concerns that should be addressed by everyone.
Competent Advice
Generally, the type of estate planning you need is directly related to the amount of assets that you have and the complexity of your family relationships. In other words, wealth, multiple marriages and children all add complexity. However, anyone of these factors standing alone will require some type of planning. Regardless of your situation, this is one matter you do not want to do yourself. Without good professional advice, you could easily end up undoing all of your planning by failing to coordinate the various parts of your plan.
Power of Attorney
Some parts of your estate plan are used during your lifetime. One of the most important is a durable power of attorney. A durable power of attorney is a document that allows you to designate an agent to handle your business affairs or to make health care decisions for you in case you are unable to do so yourself. Without a properly drafted durable power of attorney, you may be forced to start court proceedings to have a loved one declared incompetent and appoint a guardian and conservator for them. A durable power of attorney is one of the most important documents you will use during your lifetime to deal with any unexpected emergencies.
Advanced Health Care Directives
All of us have read about, or maybe even experienced, a situation in which a family does not want to continue medical care for a loved one, but the health care facility refuses to comply with the family's wishes. An advanced health directive or a living will or declaration allows you to decide when and under what circumstances you want to have medical treatment provided or withdrawn.
Will or Trust
Generally, the most important part of your estate plan will be your will or trust. If you fail to sign a will, the state of your residence will write a will for you. In most states, part of your property will pass to your spouse and part to your children. If your children have not reached the age of majority at the time they receive your property, a guardian and conservator must be appointed for them. This means additional delays and expense in the administration of your estate. All of this can easily be avoided with a will.
Covering Your Children
Wills take on additional importance if you have young children or a disabled child. Your will allows you to name a guardian for your children and to specify how and when your children will inherit your estate. By using your will to set up a trust for your children at the time of your death, you can make sure your assets will be used by your children for their education and support, and not for vacations or new cars.
Jointly Held Assets
Having a properly executed will does not mean your property will be divided according to your wishes. For example, if your assets are titled as joint tenants with right of survivorship with your son, this property will pass to your son at your death to the exclusion of the rest of your children and your surviving spouse. The improper use of beneficiary designations or payable on death accounts will also override language in your will.
Size of Your Estate
Additional estate planning is needed if the size of your estate exceeds $675,000. Generally, the size of your estate is determined by the fair market value of your assets as of the date of your death. When adding up your assets, you must include pension plans and death benefits from your life insurance. With some basic planning and the use of what is commonly referred to as a bypass trust or family trust, a married couple can pass a combined estate of $1.350,000 or less, without paying federal estate tax. With federal estate tax brackets ranging from 37-55%, it is imperative that everyone with an estate over $675,000 do some planning.