Nearly eighty percent of Americans own a home and over fifty-five percent of American citizens have minor children living at home; yet less than half of the population of the United States has ever executed a will, much less the other necessary documents making up a complete estate plan. Some of us may need long-term health care now or in the future, but clearly, since both death and taxes are certainties for all of us, finding ways to limit the amount of taxes your heirs or beneficiaries will have to pay after you are gone should be a priority, whether married or not, a parent or not, wealthy or not. The estate tax threshold may be as low as $1 million in 2011 and the estate tax could be as high as 55%. $1 million may seem like a lot of money but bear in mind that the amount of life insurance you have is added to your estate immediately upon death, so that $1million can quickly sneak up on you. Also, it is not the net value of your assets that apply to the threshhold, but the gross, so if you have a mortgage worth even as much as your house, your estate will still include the fair market value of the property.
The government taxes wages each year at somewhere between 20 and 35 percent. After your death, the government will tax an additional 45 to 55 percent of what you managed to preserve in your estate. Almost 80 percent of what you earn in your lifetime will go directly to pay your taxes unless you take the time and spend the money to work with an attorney and draft your estate plan.
There are five components to a basic estate plan. A Will is a legal declaration by which a person names one or more other persons to execute or perform the duties required of him or her pursuant to the terms of the Will. It provides for the transfer of his or her property at death as well as instructions for appointment of a guardian of children and even of pets. An Advance Health Care Directive, sometimes known as a "Living Will," is a written document that states a person's wishes regarding healthcare decisions for you when you become unable to make them for yourself, as well as life-support or other medical treatment in certain circumstances, usually when death is imminent. It also allows a person to direct his or her agent as to burial wishes, autopsies, and anatomical gifts. Finally, it should include your HIPAA designation, which allows certain designated individuals to have access to your medical records. A General or Special Durable or Limited Power of Attorney is a written authorization to an agent to perform specified acts on behalf of his/her principal. This estate planning tool makes it easier in transition to have a close friend or relative handle financial affairs without having to obtain a court order first in the form of a conservatorship. Another time I will discuss ways in which a trust, of which there are many types, may help control your estate beyond your death as well as limit your tax exposure. If you have a spouse, a child, particular charities that you support, own a home, or want to leave behind a legacy of any kind, you need to talk to an attorney about getting your will and other estate planning documents in order. If you have one, but it is older than five years, you should wait no longer to have it reviewed. It is so important that this task is not put off any longer. None of us can control how much time we have left but we can control how our loved ones are left behind.
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