Estate Planning - The Basics

Estate planning is something we must all take seriously.  Whether you have significant assets or more moderate assets, estate planning is how you ensure that your heirs receive what you want them to receive when your estate is administered.  Proper estate planning considers your current and future needs and your plans for your family upon your death.

Successful estate planning transfers your assets to your beneficiaries quickly and usually with minimal tax consequences. That is right, the right estate planning means less of your assets go to taxes and more go to the people and institutions you choose.

The process of estate planning includes inventorying your assets and making a will and/or establishing a trust, often with an emphasis on minimizing taxes. The goal of this guide is to help you begin the estate planning process.  While the guide will not answer all of your questions as every financial situation is unique, it should help you understand the key components and strategies of any estate plan, as well as understand some of the consequences of various decisions you may make during this process.  You should consult an attorney, or perhaps a CPA or tax advisor for additional guidance.

Do I Need to Worry?  You may think estate planning is only for the wealthy. If your assets are worth $2,000,000 or more, estate planning may benefit your heirs. That is because generally taxable estates worth in excess of the amounts in the chart below may be subject to federal estate taxes, with a estate tax rate of 45% of the taxable estate.

Adding up the value of your assets can be an eye-opening experience. By the time you account for your home, investments, retirement savings and life insurance policies you own, you may find your estate in the taxable category. Even if your estate is not likely to be subject to federal estate taxes, estate planning may be necessary to be sure your intentions for disposition of your assets are carried out.

It is also important to note that estate taxes are scheduled to be repealed in 2010. However, if Congress does not affirmatively extend the repeal, in 2011, the estate tax law will revert to the provisions in effect in 2001 including a $1,000,000 exclusion amount and a 55% highest estate tax rate.