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Right people + Right documents = Stronger estate plan

January 17, 2011

Not any great team will do, make sure you get experts to help you out.

In December, Congress passed a bill, which President Obama signed, extending the Bush tax cuts for two more years. A change in estate taxes is within this bill. In 2010, if someone died with a fortune there were no estate taxes. The estate tax was going to come back in 2011 with a $1,000,000 exemption, meaning there would be an estate tax on estates worth more than $1,000,000.

            The extension of the tax cuts made the estate tax exemption $5,000,000. Only individuals with estates more than $5,000,000 may have an estate tax. Most estates are not this large, but do not let that fool you into thinking you do not need an estate plan. It still is extremely important to have a plan and communicate that plan verbally and legally on paper.

            When reading estate plans, you see different terms such as a will, living will, last will and testament, durable power of attorney for health care, durable power of attorney for property, and living trust. It makes it appear that it is impossible for an individual to figure it all out. When it comes to your finances there are a lot of things I think you can do on your own. However, setting up your estate plan probably is not one of them.

            It is important to have a good team to help you in this process. One of the first people to talk to is an estate-planning attorney. When you draft your will and other important documents, you want to make sure they are legit and could stand up to a challenge in the courts. An attorney who can help with estate planning can make sure this is the case.

            Your insurance agent is another good member of your estate planning team. There are many times your life insurance proceeds can play a big role in your estate. If you have a lot of assets, but not a lot of cash to leave, additional life insurance can make sure you do not have to sell the family farm or business if you have multiple heirs.

            Even though most people will not get hit with estate taxes, it still is good to have your accountant on board. He or she can make sure you make wise financial decisions. If you are going to set up a trust, you also should find a trust officer to join your team. You can avoid a lot of conflict down the road by having an unbiased trust officer and executor of your will. Do not put one of your family members in a tough spot by having them responsible for running a trust or executing a will.

            Once you have the right team in place, have them help you — especially the attorney — get the right documents. Write a will. This will give instructions on what you want to have happen to your assets upon your death. Even if you do not have a lot of money to pass along, think about family heirlooms and other meaningful personal items. If you are just starting a family a will also is crucial so a guardian can be set up to take care of your children in the event of your untimely death.

            A durable power of attorney and living will also are important. The durable power of attorney allows you to select a person to make decisions about health care and maybe property if you become incapacitated. The living will gives instructions to physicians on what you want done regarding your health care if you suffer permanent incapacity. If this happens, it can be an extremely difficult time for the entire family, and without these instructions, can put your family in a tough spot making decisions for you. When you have clearly written your wishes, this can be avoided.

            If you have a lot of assets, you also may want to consider a living trust. This can transfer legal title from you to the trust and still provide a way to have management of the assets. A living trust can help some of your assets avoid going through probate upon death as well. Trusts can be complex, so make sure you go to your team for help on this.

            Along with having the right team and right documents, it is critical that the people important to you can find this information upon your death. You need a legacy box or legacy drawer. This should be located in your home and your family should know where they can find it. Provide the information your family will need in this drawer. This can include a letter explaining what is located in the drawer, your will, funeral instructions, insurance policies, important documents including birth certificates and social security cards, last letters to your loved ones, important passwords and account information, and people to contact and what they can help the family with.

            This should be located where your family can find it, but it is important to have a back up also. A safe deposit box can serve as a backup, but do not store everything in the safe deposit box alone. If no one in your family knows about the box or does not have access to it, it can prolong the process at a very difficult time for your family.

            Talking about death is not fun. It really makes you examine your own mortality and can be a real eye opener. Many times we put off estate planning, because we do not want to think about it. Unfortunately, whether you think about it or not, you eventually are going to die. Let your last gift be to have everything in place so there are not extra burdens on your grieving family.

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