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Estate PlanningReprinted from GATEWAY Magazine by permission It's About Life Online help and step-by-step software can guide you to a plan for your family's future.Let's get real. Who wants to make plans for the inevitable day of reckoning? It's much easier to simply put off writing a will. Most people respond with excuses when it comes to drafting a will: "I don't need one. My family knows what I want." Or, "I'm not rich enough to have something called an estate. Why should I bother?" Estate-planning phobics are pretty much in the majority. Nearly three out of every four people who die each year in the U.S. have neither a will nor an estate plan, according to Fundamentals of Estate Planning, a report from Deloitte & Touche, an accounting and management consulting firm. Even smart business and wealthy folk neglect to write proper wills. When Joe Robbie, for example, founder and owner of the Miami Dolphins, died in 1990, his family was forced to sell its share of the team to pay estate taxes estimated at $47 million. By law, an estate is defined as property or possessions. Maybe it's a Subaru Outback or an opal ring or a Labrador retriever. At the most basic level, estate planning is simply communicating your desires, while ensuring that your assets go to the people you select -and not to your silent heir, the Internal Revenue Service. Increasing numbers of people today have significant money socked away in employer-managed aged retirement accounts, such as 401(k) plans and Individual Retirement Accounts (IRAs). It's not unusual these days to have assets valued at $1 million in retirement money as well as a house worth $200,000 or more. So while it's always grim news for the family if you die suddenly, it's a whole lot worse without a will. The federal government and state in which you live may enjoy your spoils, not the folks in your life who could really benefit from them. When John F Kennedy Jr.'s wife, Carolyn Bessette, and her sister, Lauren, died in the plane crash last summer, neither of the Bessettes had a will. As a result, besides the horror and grief, the family is also dealing with a mess in the courts. Currently, estate tax kicks in for estates valued at $675,000, and the tax starts at a whopping 37% rate and moves up smartly to 60%. Recent legislation, now in effect, will gradually move the $675,000 exclusion up to $1 million by 2006. But these top rates still exceed those of countries such as Belgium, Germany and Sweden, which are known for their own hefty taxes. Money in 401(k) or other retirement plans that are tax-deferred is also taxable up to 50%, including state tax. On top of that, there can be an additional estate tax. At the end of the day, your heirs may get maybe one fourth of the pie and the government, three-fourths. Is that what all your hard work and saving was all about? Not a chance. The Internet has made it much easier to learn about estate planning - without having to pay as much for the lawyer's fee. You can find all types of basic will- and trust-writing tools online and sound software programs that can help you make plans and choices. Here are the best sites to explore:
Estate-planning info is also typically included and updated on various mutual fund firm websites. For help and calculators, cruise such sites as, T.Roweprice.com and Vanguard.com. The best estate-planning software is WillMaker (Nolo Press; $70, usually discounted and occasionally with rebate coupons; www. nolo.com. Solidly dominating the market, this program has been around since 1985, and is regularly updated to accommodate tax law changes. It offers all the background and information you need to write a will or a living will, create a durable power-of-attorney document and more. For the most part, Willmaker is easy to navigate. You'll find solid explanations of estate-tax law and customized forms for adults with varying life circumstances, such as single parents and married adults, with and without kids. Step-by-step instructions are lucid. Although the program is a bit pricey considering that you'll still need to pay an attorney to finalize the document, it will surely cut time and fees at the lawyer's office. And, last, let's make a deal. I promise - you read it here - to get my own estate in order if you do. Like you, I tend to put off that chore. I definitely must decide on a competent guardian for my beloved yellow Labrador retriever, Becky - someone who will keep her in kibble and play fetch. It's the least I can do. And, of course, I will.
What to Know Before Drafting a Will Don't let all the complicated stuff about estate-planning prevent you from drafting a will. You don't need to learn about credit shelter trusts, the generation-skipping transfer tax or conservation easements. Will-making is relatively painless and can be as elaborate or simple as you prefer. You' l probably need an attorney to make sure the document holds up in court. But before getting legal advice, make sure you consider how you want to set up control.
Reprinted from GATEWAY Magazine by permission Revised: February 12, 2009 |