The ABC's of estate planning

Whether you are rich or poor, estate planning is a must for everyone. Failure to plan your estate before you die adds to delays, legal problems and emotional turmoil for your family. It could also be the biggest mistake of your life.

"Many of us have encountered situations where a family member or friend has passed unexpectedly, and those left behind have the decidedly difficult position of dealing with the morass of details and expenses, legal issues and administering an estate," says Kyle T. Williams, an estate-planning attorney and trust advisor with JP Morgan Chase Bank in Chicago.

The best way to safeguard your wealth and your loved ones is to put your assets, beneficiaries and personal properties in order with a well-crafted, written plan to ensure that your wishes are carried out.

The time to draft an estate plan depends on your wealth and family situation, among other reasons.

"You need an estate plan if you have minor children and if you have significant wealth," Williams says. "To cope with any future long-term illnesses or incapacities, you need a health care power of attorney that will enable your agent [spouse, sibling or loved one] to make health care decisions on your behalf."

For beginners, setting up an estate plan isn't free--or easy. It could cost at least $2,500 for a married couple with children if you use an attorney. The more complicated the estate plan, the more it's likely to cost. But before talking to an attorney or other advisor, you should become an educated consumer and learn the basics.

Start by listing your beneficiaries for insurance policies and retirement accounts, and naming guardians for minor children. Make a complete list of your assets and an accurate estimate of the value of each. Ask yourself a basic question: Will you leave most of your estate to family or to charity? Then speak with an advisor regarding preparing a will and setting up a trust.

Williams recommends that you become familiar with these must-know estate-planning terms:

* A last will and testament is your statement as to how your personal property and probate assets shall transfer to designated beneficiaries upon your death. You can specify how you want to be buried, or who will be the guardian of your minor children, or who will be the executor of your probate estate.

* Probate assets are properties that don't pass directly to beneficiaries by law and exceed a certain amount determined by state law.

* A living will addresses the measures a physician may take to prolong life. This document can be presented in all states, and there is no designated agent to act on your behalf.

* A health care/property power of attorney permits a designated agent to make decisions regarding your health/property care when you are unable to do so, and is governed by state law.

* A living trust is a written document that permits you to maximize the transfer of your wealth by capitalizing on estate and gift tax laws. Unlike a will that becomes a public document upon death, a trust remains confidential. You will be able to manage your own assets or name a trustee to manage your trust assets while you are living or after death.

* An executor is the person or institution that represents your estate and carries out the terms of your will.

* Transfer of wealth is the process of your wealth passing to another individual or institution during your life or upon your death.

When planning your estate, it's vital to talk to your family members, review your assets and consider your options. Talk to your advisors and plan accordingly. Take control. If you don't, someone you love may not reap the benefits of your labor.

COPYRIGHT 2006 Johnson Publishing Co.
COPYRIGHT 2008 Gale, Cengage Learning