Let's face it.
Your alive now and one day you'll die.
You will likely own stuff when you die, and all of your stuff is called your "assets.
" Assets have value, and at your death, those assets need to be given to someone who is still alive...
unlike you.
Your assets are also known as your "estate.
" The Federal Government assesses an Estate Tax on estates.
Most estates will not be taxed as they will be under the minimum asset value for the tax.
In 2007 and 2008, only the portion of an estate over $2 million is subject to federal estate tax.
The threshold rises to $3.
5 million in 2009 before the tax disappears in 2010.
But estate planning is not just for tax treatment.
Your estate planning is essential for protecting you and your loved ones.
Here are 14 ways you can mess up your estate.
Not having a Will: A Last Will and Testament is a legal document that outlines your wishes for the disposition of your estate.
In the absence of a Will at your death, the Probate Court of your state will make one for you.
The court's disposition of your estate might run opposite of your wishes.
But without a Will, that's the way it will be.
Not updating the Will: The circumstances of life change, sometimes rapidly.
Serious illness, divorce, death of a spouse, adoption, birth of each child, moving from one state to another, receiving a windfall, getting married or remarried, fluctuations in asset value, and deaths of heirs can change what you wish to do with your estate.
Update your Will annually, or at least review it annually to make sure needed updates are done.
Wrong executor: Name an executor who will manage your estate from the time of your death until the time that your assets are distributed.
This is a big job, so make sure the person has the time and the ability to do it.
Also name a backup in case the chosen person refuses the job at your death.
Couple as guardians: Don't name a couple as guardian.
They could split up or disagree about what's right for your child.
Same person as guardian and financial trustee: To provide checks and balances, the guardian and trustee should be separate persons.
Not leaving enough to a spouse: Assets left to a spouse aren't included in the taxable estate.
So make sure that your spouse is named specifically in the Will to receive certain assets.
A bypass trust provides regular income for a surviving spouse until death.
Then the assets go to the children.
Leaving it all to a spouse: This choice may leave out your children, or children from a previous marriage.
Be specific in your bequeaths.
Improperly disinheriting a child: You must spell it out in the Will, not just tell everybody that the child gets nothing.
Not planning for worst case scenarios: What if you're alive but can't make your own financial decisions? Prepare a Durable Power of Attorney for finances, a living will and, because living wills aren't always enforceable, a proxy for health care.
Keeping the insurance policies in a bank safe deposit box: The box could be sealed at your death, and it could be weeks or months before the court orders it unsealed.
Your executor will need that money to settle your estate.
Being too specific: There may be certain items, such as a ring or piece of furniture that you want to bequeath to a certain person.
Fine.
But don't spend time naming everything in your house and who gets it.
Try to bequeath assets in groups of assets, such as "Furniture" or "Jewelry" or "Stocks and Bonds.
" Ruling from beyond the grave: It's usually a bad idea to tie bequests to an heir's behavior.
A testamentary trust or spendthrift trust in the will can control how money is distributed so an irresponsible heir can't blow it all at once.
Wrong kind of ownership: There are three types of joint ownership.
Your share of assets don't automatically go to the other joint owner on your death.
Be sure you have the proper joint ownership in your state.
Not telling where you keep the will: Only have ONE COPY of the will that has been properly executed with signatures.
Keep unsigned copies for your own records.
DON'T keep the signed copy in a bank safe deposit box, which could be sealed at your death.
Estate planning doesn't have to be complicated.
But it does require careful planning.
So be careful and get it done right.
Your alive now and one day you'll die.
You will likely own stuff when you die, and all of your stuff is called your "assets.
" Assets have value, and at your death, those assets need to be given to someone who is still alive...
unlike you.
Your assets are also known as your "estate.
" The Federal Government assesses an Estate Tax on estates.
Most estates will not be taxed as they will be under the minimum asset value for the tax.
In 2007 and 2008, only the portion of an estate over $2 million is subject to federal estate tax.
The threshold rises to $3.
5 million in 2009 before the tax disappears in 2010.
But estate planning is not just for tax treatment.
Your estate planning is essential for protecting you and your loved ones.
Here are 14 ways you can mess up your estate.
Not having a Will: A Last Will and Testament is a legal document that outlines your wishes for the disposition of your estate.
In the absence of a Will at your death, the Probate Court of your state will make one for you.
The court's disposition of your estate might run opposite of your wishes.
But without a Will, that's the way it will be.
Not updating the Will: The circumstances of life change, sometimes rapidly.
Serious illness, divorce, death of a spouse, adoption, birth of each child, moving from one state to another, receiving a windfall, getting married or remarried, fluctuations in asset value, and deaths of heirs can change what you wish to do with your estate.
Update your Will annually, or at least review it annually to make sure needed updates are done.
Wrong executor: Name an executor who will manage your estate from the time of your death until the time that your assets are distributed.
This is a big job, so make sure the person has the time and the ability to do it.
Also name a backup in case the chosen person refuses the job at your death.
Couple as guardians: Don't name a couple as guardian.
They could split up or disagree about what's right for your child.
Same person as guardian and financial trustee: To provide checks and balances, the guardian and trustee should be separate persons.
Not leaving enough to a spouse: Assets left to a spouse aren't included in the taxable estate.
So make sure that your spouse is named specifically in the Will to receive certain assets.
A bypass trust provides regular income for a surviving spouse until death.
Then the assets go to the children.
Leaving it all to a spouse: This choice may leave out your children, or children from a previous marriage.
Be specific in your bequeaths.
Improperly disinheriting a child: You must spell it out in the Will, not just tell everybody that the child gets nothing.
Not planning for worst case scenarios: What if you're alive but can't make your own financial decisions? Prepare a Durable Power of Attorney for finances, a living will and, because living wills aren't always enforceable, a proxy for health care.
Keeping the insurance policies in a bank safe deposit box: The box could be sealed at your death, and it could be weeks or months before the court orders it unsealed.
Your executor will need that money to settle your estate.
Being too specific: There may be certain items, such as a ring or piece of furniture that you want to bequeath to a certain person.
Fine.
But don't spend time naming everything in your house and who gets it.
Try to bequeath assets in groups of assets, such as "Furniture" or "Jewelry" or "Stocks and Bonds.
" Ruling from beyond the grave: It's usually a bad idea to tie bequests to an heir's behavior.
A testamentary trust or spendthrift trust in the will can control how money is distributed so an irresponsible heir can't blow it all at once.
Wrong kind of ownership: There are three types of joint ownership.
Your share of assets don't automatically go to the other joint owner on your death.
Be sure you have the proper joint ownership in your state.
Not telling where you keep the will: Only have ONE COPY of the will that has been properly executed with signatures.
Keep unsigned copies for your own records.
DON'T keep the signed copy in a bank safe deposit box, which could be sealed at your death.
Estate planning doesn't have to be complicated.
But it does require careful planning.
So be careful and get it done right.
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