Managing Your Estate
From the moment you are on your own financially you need to think about estate planning and then do something about it. Planning for the unexpected is best done today, especially if you have a family. No matter what your net worth is, it's important to have a basic estate plan in place. An individual's estate includes all assets and liabilities.
Estate planning is more than just the process of writing a will. If you just write a will you are not taking any actions to provide for yourself should you become incapacitated due to an accident, illness or old age. A durable power of health care and durable power of attorney are important to ensure that your wishes are carried out if you are unable to make your own health care and financial decisions.
You need to do estate planning to avoid dying "intestate". Dying intestate means dying without having created either a will or a trust. For most people, writing a will is a very simple and inexpensive procedure, yet over 70% of Americans die intestate. Probate, creditors, lawsuits, judgments, lawyers, and death taxes can damage much of the value of your estate and allow your property to go to unintended heirs and in unintended ways if you don't manage your estate.
Preparing A Will
If you are an adult and have any assets, get a will! A will is a legal document that's used to transfer assets you own to the people or organizations you want to leave them to after your death. In it, you name an executor, who is the person you choose to carry out your wishes, and an alternate in case your first choice is unable to serve. If you have minor children, you will use the will to name a guardian to care for them.
Medical Directives or Living Wills
Most people have strong feelings about the type of health care they would or wouldn't want to receive if they were unable to make health care decisions for themselves. An advance medical directive, populary known as a living will, is a document you create while you're healthy that specifies how you want to be treated if you're terminally ill or incapacitated. Your living will can cover issues such as organ donation, funeral arrangements and hospital or nursing home arrangements, as well as acceptable medical treatments.
Health Care Power of Attorney
The living will requires a health care directive and a health care proxy or health care power of attorney. A health care directive is the written statement spelling out how you want to be treated, in as much detail as possible. Some states have mandated forms that must be used in that state. Every adult, regardless of age, should have advance directives.
A health care proxy is the person you designate to make sure the health care decisions you included in your living will are carried out if you're unable to communicate on your own behalf. Usually, a health care proxy is a family member or close friend. Make sure you physician has a copy in your file and other copies should go to your attorney and the person you designate as your health care proxy.
Durable Power of Attorney for Finances
A durable power of attorney (a form that must be signed in front of a notary public) allows you to appoint a trusted agent to manage your financial affiars if you become unable to do so yourself due to physical disability or mental incapacity. The power of attorney lasts until your death, unless you revoke it. The person you give power of attorney to can enter into contracts, negotiate, pay bills, buy and sell property, and handle your other financial affairs on your behalf if you're not able to.
Five Reasons for Estate Planning
1. To make sure that each of your assets goes to the person you want to have it.
2. To prevent estate and death taxes from taking a big bite out of your assets.
3. To be sure your children are in good hands after you die.
4. To be prepared in case you can't take care of yourself any longer.
5. To be sure your loved ones know what you want them to do if you become incapacitated or die.
Regardless of how simple your estate plan is, always review it whenever significant events take place. If you marry, divorce, remarry, or have a child, you will need to make changes to your will. If you move to another state, make sure your will complies with the laws in that state and is still valid. If the executor of your will, administrator of your trust, or the guardian you appointed for your kids dies or becomes incapacitated, make changes immediately.
Estate Taxes
There are two easy ways to give gifts tax-free and reduce your estate.
Start giving it away early. You may give up to $12,000 a year to an individual (or $24,000 if you're married and giving the gift with your spouse).
Cover medical expenses. 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.
