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| What Is Estate Planning? |
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| December 11, 2010 - Attorneys |
| By Kristie Haller |
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Estate planning is the process of determining what you want to happen to your estate, which includes all the rights, titles, and interests that you have in the property you own. When preparing a plan, consider the accumulation of that property, how you want to conserve its value, and finally how you want to distribute your estate after your death. Throughout this process, consider the best ways to effectively and efficiently accomplish these tasks, keeping both tax and non-tax objectives in mind.
Estate planning and financial planning have many of the same concerns, including income-tax planning, investment planning, insurance planning, and retirement planning. There are three main objectives of estate planning:
1. Preserve the wealth that has been passed down through previous generations.
2. Use the wealth as desired during your lifetime.
3. Pass on to your heirs the greatest possible amount of that wealth in the appropriate form after your death.
There are several key words that are unique to estate planning.
I will present them in greater detail later, but I want to introduce them here.
* Probate is the process of proving who is entitled to get the property if the person who died did not make that clear before his or her death.
* Testator (male) and testatrix (female) refer to people who leave a valid will upon their death.
* Intestacy is what an estate is called if there is no will. Partial intestacy means the will did not effectively dispose of all the assets.
Three types of property classifications are generally used in estate planning:
* Real property includes land and any permanent improvements on that land.
* Tangible personal property includes property other than real estate that has a value because of its physical existence. This includes such things as cars, furniture, and collectibles.
* Intangible personal property includes property that you can't touch but that has a value because of the legal rights you hold. This can include a stock certificate or an installment note but can also include copyrights, patents, and other intellectual property rights.
Who needs estate planning?
Just about everyone. Even though you may not be wealthy, some degree of planning will probably be necessary.
Here are a few examples:
People with minor children. You need to specify who will care for the children upon the death of their parents and how you will provide for that care financially. You normally make these provisions in your will.
People who own assets in multiple states. Estate planning will avoid what is called ancillary probate, in which an additional probate process must be completed in a state different than the one in which you resided because you owned real estate in that second state. Ancillary probate can be very costly and can reduce the value of your estate.
People who own a small business. You must determine what should be done with your interest in that business-whether it is to be passed on to your heirs or sold. If it is to be sold, you must be certain that your interest in the estate will be marketable at the time of your death.
People who will have to pay estate taxes. If your estate is large enough that taxes will need to be paid upon your death, you must plan for that payment. You want to be sure you have enough liquid assets to avoid the forced sale of estate assets.
Often this is done with life-insurance planning.
People who want to determine how their assets will be divided among their heirs. If you don't specify how you want to divide your assets, the state will do so as part of probate.
People in high-liability occupations. If you're in an occupation that has a high risk of being sued or facing claims from creditors, estate planning will help protect your assets. Doctors are a prime candidate for this type of planning.
People whose spouses are not U.S. citizens. You will need to provide for your spouse's death. The marital deduction is not available in most cases for a spouse who is not a U.S. citizen.
People who think they may become disabled. You need to appoint a surrogate decision maker as part of your estate planning.
Your surrogate will be able to make medical and financial decisions for you. You may also need to plan for possible Medicaid eligibility as part of your estate-planning process.
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Article Source: http://EzineArticles.com/?expert=Kristie_Haller |
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