Estate Planning

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, which administers wills. Some also offer greater protection of your assets from creditors and lawsuits.

Prevent disputes and confusion.

Inheritance can be a loaded issue. By being clear about your intentions, you help dispel potential conflicts after you’re gone.

Estate Tax Exemption in Estate Planning

The federal estate tax exemption changes regularly.

The estate tax exemption hit $3.5 million in 2009, but was phased out completely in 2010, but only for a year. Unless Congress passes new laws between now and then, the tax will be reinstated in 2011 for estate at $1 million or greater.

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 y By our 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.

What to Give in Estate Planning

Give gifts tax-free and reduce your estate.

You may give up to $13,000 a year to an individual (or $26,000 if you’re married and giving the gift with your spouse). You may also pay an unlimited amount of medical and education bills for someone if you pay the expenses directly to the institutions where they were incurred.

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.

1. No matter your net worth, it’s important to have a basic estate plan in place. Such a plan ensures that your family and financial goals are met after you die.

2. An estate plan has several elements.

They may include: a will; assignment of power of attorney; and a living will or health-care proxy (medical power of attorney). For many people, a trust not only makes sense but is the foundation of the estate plan. When putting together a plan, you must be mindful of both federal and state laws as well as practical concerns that may not be considered without the guidance of a trusted attorney.

3. 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. 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?