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Estate Planning

You don't need to be a millionaire to have an estate plan. No matter your net worth, it's important to have a basic estate plan in place. Such a plan ensures that your family and financial goals are met after you pass way.

An estate plan has several elements. Common to most plans are a will, assignment of power of attorney, and a health-care proxy (medical power of attorney) or living will. For some people, a trust may also make sense. Trusts are legal mechanisms that let you put conditions on how and when your assets will be distributed upon your death. They also allow you to reduce your estate and gift taxes and to distribute assets to your heirs without the cost, delay and publicity of probate court, which administers wills. Some also offer greater protection of your assets from creditors and lawsuits. Life insurance proceeds are paid to a beneficiary at your death. Any gift choices to be made either during your life or after death to family friends or charity. Safeguard your important financial documents. Examples are life insurance policies, originals of wills and trusts, health powers of attorney, health directives, savings bonds, deeds to a home or other property, car or boat title certificates, paper U.S. Savings Bonds, etc.

When putting together a plan, you must consider both federal and state laws governing estates.

The Estate tax is a tax on property passed from deceased individuals to their heirs. It is assessed only on large estates. In 2011, "large" means more than $5,000,000 excluding anything left to a spouse or to charity. The estate tax is paid from the assets of the estate, before anything can be distributed to heirs. An estate may have to sell property or investments in order to pay this tax.

If you pass away without a will, you are said to be intestate. In this case, your property is distributed according to the laws of your state. By having a valid will, you can control who get what, rather than allowing the state to make those choices for you. Property reverts to the state when a person dies without heirs.

There are two easy ways to give gifts tax-free and reduce your estate. You may give up to $13,000 a year to an individual (or $26,000 if you're married and giving the gift with your spouse). You may also pay an unlimited amount of medical and education bills for someone if you pay the expenses directly to the institutions where they were incurred. [Read More]

Estate Tax – New Portability Concept

For married individuals dying in 2011 and 2012, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 Tax Act) added a new, temporary portability provision allowing a surviving spouse to use any unused basic exclusion amount of a deceased spouse for gift and estate tax purposes. Portability of the exclusion between spouses and an increase in the basic exclusion amount would seem to make estate planning easier for many estates. In 2011 and 2012, the basic exclusion amount is equal to $5,000,000 plus indexing in 2012 to $5,120,000. Unless, extended by Congress, in 2013, the applicable exclusion amount is scheduled to decrease to $1,000,000 and 55% (not the existing 35%) estate tax rate will kick in on January 1, 2013 and on 12/31/12; the portability concept is set to expire everyone's situation is unique and the issues are complex. To help guide you through these opportunities and uncertain times, consult an experienced estate planning attorney.
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