No one enjoys a conversation about death. And, with the estate tax exemption now set at $5 million for an individual and $10 million for a couple, many people may believe they have no reason to consult an attorney about their estate planning. But avoiding the topic of estate planning can mean unnecessary expense, confusion and conflict.
SmartBusiness last week highlighted the fundamentals of a “well-thought-out estate plan,” with topics that everyone should consider – whether prince or pauper.
- Why do you need an estate plan? A comprehensive estate plan ensures that your estate will distributed according to your wishes, provides protection for yourself in the event of your own disability, and allows you to plan for minor children, pets, and charitable causes. You can also make sure that the assets you leave behind will be there for your intended beneficiaries - and not their creditors or ex-spouses.
- Can I write my own will? You certainly can, and there are many online sites to help you do so! However, remember that you get what you pay for. Improperly drafted or last-minute, hand-written wills frequently are contested and invalidated in court. If you don’t know what you’re doing, the outcome could be much different than what you expect.
- What should every estate plan have? SmartBusiness recommends two powers of attorney and a living will. That's not a bad start, but I would expand the list to include a will, powers of attorney for financial affairs and for health care, and an authorization to your physician to share your health-care information with your health-care agent.
- What about trusts? Many people choose to create trusts, not only to reduce estate taxes, but also to help their heirs avoid probate. Trusts also can help shield assets from loss to due to unforeseen circumstances, such as the bankruptcy, divorce, or lawsuits of your heirs.
- What mistakes do people tend to make in estate planning? The writer points out two common mistakes: failure to plan for their personal effects, and failure to review and update their plans over time. Reviewing and updating your estate plan is particularly important in light of the frequent changes that have characterized our estate tax law of late. Although the estate tax "coupon" (the amount you can pass estate tax-free) is $5 million for the next two years, the coupon is set to go down to $1 million in 2013, and the estate tax rates are set to go from 35% to 55% at that time. Another mistake that we see is failure to implement an estate plan by making sure all assets are properly titled. Many people create trusts but then do not make sure that title to their assets is transferred into their trusts.
You can learn more about comprehensive estate planning in the Fundamental Estate Planning Practice Center on our website. You also may want to review the November issue of our estate planning newsletter, Are You Ready?, which focuses on how to get (and keep) your legal affairs in order.