Planning Is More Than Minimizing Estate Taxes
With all the political
discussion about eliminating or modifying the estate tax (or "death tax"
as some call it) it is helpful to have an understanding of some of the
other issues of estate planning. Here are some of the issues you should
In many families, death and money are almost forbidden subjects. Yet
some frank discussions with children (or parents) can help everyone
be prepared for the unexpected. At a minimum, key family members should
know the whereabouts of important documents and be aware of any medical
treatment options you want or do not want.
This legal document dictates how your assets are distributed from
your estate and can be used to designate legal guardians for dependents.
These are decisions you, not the courts, should make. You can also
use your will to name the executor of your estate. This person will
oversee the estate until all assets are distributed and the estate
officially ceases. You should choose someone that is capable of understanding
and carrying out your wishes.
accounts. You should carefully choose the beneficiary of any retirement
plan you have, including IRAs. In most cases, the person who will
get the assets in your retirement account is the determined by the
beneficiary form you sign, not your will.
life insurance trusts. When you hear that life insurance proceeds
are tax-free, it is only referring to income taxes. If your estate
is the beneficiary of a life insurance policy, the proceeds of that
policy are included in your taxable estate. In many cases, those proceeds
are what increase the size to the point where estate taxes are due.
of attorney for finances. This document gives another person the
ability to make financial decisions for you if you become incapacitated
and unable to make your own decisions. If this power of attorney is
invoked, that person can access your accounts, pay bills, write checks
and handle your investments. Without it, it may be necessary to go
to court frequently to enable transactions to be made. In this power
of attorney, you should choose someone that is capable and knowledgeable
enough to make decisions on your behalf. It may be an adult child,
sibling or trusted friend. If you do not have someone like that, you
may want to designate your attorney or accountant.
These documents direct how health care decisions are to be made if
you are not capable of making them yourself. A durable power of attorney
for health care gives another person the ability to make medical decisions
and a living will tells your family and medical personnel how you
are to be treated if you become terminally ill. It also states your
wishes about being placed on life support. Some states may require
separate forms for each.
planning checkups. Estate plans should be reviewed on a regular
basis. Many estate attorneys suggest a review every three or four
years. If your situation changes (divorce, death of a spouse, birth
of children or grandchildren, changes in wealth status), you may want
to review your plan more often. In addition, if you move to another
state, be sure to get an estate plan review.
Use an expert.
The estate laws are complex and the consequences of being inadequately
prepared are significant. While you may want to do some investigation
on your own. It is wise to use a qualified attorney for your estate