Estate Planning 101

When many people hear the word "estate," they associate it with rich, older people who have a great deal of wealth and property. But in reality, an estate is anything of value, from a child's small savings account to a teenager's special ring.
 
Without a will, which is the crux of any estate plan, your belongings become the property of the state. And if you are the parent of minor children, you definitely want to be sure that those children are placed with a trusted individual. No matter what your age or the amount and nature of your property, having an estate plan is a good idea.

- What is involved in estate planning?

Basically, estate planning involves appointing someone to act on your behalf in the event of your death or incapacitation. This person, called the executor, will see to the distribution of your property according to your will. It is also advisable to draw up a power-of-attorney to appoint an individual who can make medical and health care decisions for you and manage your assets in the event that you become incapacitated.

- What exactly is a will, and do I really need one?

A will is a legal document that comes into effect in the event of your death. In a will, you appoint an executor who will manage your estate, including the payment of taxes, expenses, debts, etc. The executor also sees to it that your property is distributed according to your will. If you have children under the age of 18, your will nominates their legal guardians. To avoid confusion, frustration, and legal battles for your grieving relatives, it is prudent for everyone to have a will.

- Can I make changes to my will once it has been signed?

Yes. The will only becomes binding and unchangeable in the event of your death or mental incapacitation. You are free to make any changes you like and, in fact, many people do so as they acquire new property or sell parts of their estate.

-Do I need any other documents besides a will?

Many experts suggest a medical power-of-attorney, living will, or health-care proxy as part of estate planning. These are documents that ensure, either by written directions or the appointment of an individual who can give directions for you, that your wishes are followed in the event of a medical emergency.

- Do I need a lawyer to do estate planning?

Not necessarily. You may want to see an attorney or financial advisor who can guide you through the entire process of estate planning, but drafting your will does not have to be done by an attorney. Ultimately, this one is up to you - if you feel that you can afford it and would like for an expert to put the documents together, by all means do so. But you don't have to - many of the forms for estate planning can be found online. You just have to be sure that your will is signed before two witnesses, and acknowledged by a notary public.

- What about estate taxes?

As of 2009, there is no federal tax on estates that are worth less than $3.5 million. It is important to find out your state's laws with regard to estate taxes, too. Some states have a gift exemption and some do not. An attorney or financial advisor will be knowledgeable about your state's tax policy, as will your state tax department.

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