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Estate Planning is for Everyone

Though most Americans are aware that they need a will, the majority haven't prepared one, to say nothing of a more comprehensive estate plan to avoid probate or save on estate taxes. And unfortunately many who have thought about what should happen to their property when they die haven't updated their plan in years.
The objective of an estate plan is to protect your assets and make sure your instructions are followed should you become permanently disabled or die (who take care of you or who will get your stuff). Some of the tools used to accomplish this are very simple and other are very complicated. Although there are a lot of printed forms and software packages that can assist you in planning your estate you would be well served to consult an estate planning attorney. Once you're gone mistakes are hard to correct and a poorly designed estate plan can do more harm than good.
Estate planning is a family issue and is not just for seniors citizens. Therefore we will make a few suggestions as to what an estate plan might look like at different stages in one's life.

 
Young Single Adult

Even a young single adult needs to have a some kind of estate plan. Every year thousands of young adults are disabled or die unexpectedly. Without some kind of plan you would be imposing the burden of your final expenses or worse yet the expense of providing for all of your needs on a third party. Most likely your parents. Although these things do happen, they are not the norm and you should be planning for the future.
These are the items associated with a thorough plan:

  • Will

  • Living Will
  • Health Care Power of Attorney
  • Durable Power of Attorney
  • Life Insurance
  • Disability and Long-term Care Insurance

Young Married Couple with Children

Having children increases the importance of having a well thought out estate plan. What would happen if you or your spouse or both of you were to die or become disabled? Would this have a financial impact on your family's life style? It doesn't have too.
Appoint a guardian, in your will or trust, to care for your children in the event that something happened to you and your spouse. Make sure that your guardian is a willing appointee and make sure that there will be sufficient resources in your estate to provide for your children. If your financial resources are limited, the best way to build an estate is with life insurance.
Life insurance can also be used to replace the income of a deceased spouse. It is advisable to have coverage that will provide a benefit equal to at least 5 years of the deceased spouses income. If your spouse doesn't have an income, but stays at home with the children you must try to establish the value of those services.
These are the items associated with a through plan:

  • Will & Trust (depending on size of estate)

  • Living Will
  • Health Care Power of Attorney
  • Durable Power of Attorney
  • Life Insurance & Trust (depending of size of estate)
  • Disability and Long-term Care Insurance

Middle Aged (40 - 55)

At this point we are going to be optimistic and assume that life is good and that you have been fortunate enough to accumulate some wealth. As we accumulate wealth we must consider what will happen to it when we are gone.
If your estate value is in excess of $650,000 you will need to do some serious planning to reduce the expenses associated with estate taxes and probate. There are several kinds of trusts and gift giving techniques that can be used to reduce the size of your estate. The most common, the AB trust, is one that couples use. Each spouse leaves property to their children with the condition that the surviving spouse has the right to use the income that the property produces for as long as they live. In 2006, an AB trust will be able to shield up to $2 million from estate taxes.
Although protecting your estate from estate shrinkage is important, most estates are never subject to estate taxes. The more important issue will be those you leave behind, your spouse and children. There will likely be income replacement issues that you will want to plan for. (These issues discussed above in young married adults w/children)

Additional, because you should be in the prime income earning years of your life you should have plan to deal with an unexpected disability. The facts show that you are more likely to be disabled during these years than you are to die. Disability and Long-term Care insurance are a very inexpensive way to protect against the devastating expenses associated with a long term disability.
These are the items associated with a through plan:

  • Will & Trust (depending on size of estate)

  • Living Will
  • Health Care Power of Attorney
  • Durable Power of Attorney
  • Life Insurance & Trust (depending of size of estate)
  • Disability and Long-term Care Insurance

Senior Citizens

Because most senior citizens have a will and have done some planning we would like to focus on making sure it is up to date and complete.
Many people have wills that were created 20 or 30 years ago. Although they may still be legally binding, they may not be. What happens if you move to another state or one of your beneficiaries should proceed you. There are many reasons why you should keep your plan updated. If you do not, your estate may end up being probated by the state and they will determine how your assets will be distributed.
If you have a large estate (over $650,000 in value) you should probably consider using a trust to reduce expenses associated with probate and estate taxes. (Discussed above)
Although it is not likely you would need disability insurance at this stage in your life, long-term care insurance deserves a very careful look. Rates are based on your age of issue. This means the earlier you take out coverage (younger age) the lower the premiums. Government statistics indicate, over 50% of women and 33% of men age 65 and older will need assistance with activities of daily living or enter a nursing home in their lifetime.* If you have assets to protect long-term care insurance would seem to be the logical choice to protect yourself against the high cost associated with this type of care.
These are the items associated with a thorough plan:

  • Will & Trust (depending on size of estate)

  • Living Will
  • Health Care Power of Attorney
  • Durable Power of Attorney
  • Life Insurance & Trust (depending of size of estate)
  • Long-term Care Insurance

Although we never hope for the worst we should always prepare for it. A well developed plan can turn the most devastating situation into a time of reflection and provide you and your family with the peace of knowing that all of your financial burdens will be covered.

 

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