What Most Americans Don’t Know About Estate Planning

By | August 3, 2011

In America, our culture can often be described as “impatient.”

A flight that’s delayed ten minutes can feel like a lifetime of waiting. A text message that takes ten seconds longer to send will make you feel like your phone belongs in the stone age.

And yet when it comes to taking action on estate planning, we suddenly seem to have all the time in the world. “A will?” we might ask ourselves. “But I’m only 40. What’s the point of a will right now when I don’t even have that much money saved?”

This, of course, is the wrong attitude. But there’s more to the story: Americans simply don’t know enough about estate planning to embrace it. Sure, many people with a lot of property to leave behind seem to be on top of things. But it doesn’t take a brilliant money manager to exercise sound financial planning – and you don’t have to have a lot of money to enjoy the process of drafting a will.

Hopefully this article will fill in this gap by explaining many of the basic estate planning strategies that are available to Americans under current laws. At the very least, you can read it while you’re waiting for your flight to board!

Drafting a Will

The first thing you need to do to make sure that your estate will be taken care of after you die is to draft a will. Consult a trusted, experienced lawyer who’s knowledgeable about wills and schedule a meeting – if you bring in enough information about your property, you should have no problem drafting a will within a short amount of time.

Drafting a will is not a very difficult process; the only real preparation you’ll need is to tabulate your investments, your finances, your accounts, and your property. There will be some difficult questions to ask yourself, of course, but that’s no reason you need to put off drafting a will any longer.

And what can you do when drafting a will? Your options are almost unlimited. You can leave specific property to specific people. You can leave behind instructions for the care of that property. You can leave behind funeral instructions, burial instructions – even a kind note if you want.

Avoiding Estate Taxes

They say there are two certainties in life: death and taxes. In estate planning, you deal with both. The question is how to avoid expensive estate taxes – which can rob you of around half of your total wealth before you leave even a penny behind.

There are strategies to avoid these taxes. First, you can create a trust that will provide money to a loved one after you die – because the money is in the hands of a trust and not your estate, it will not be subject to the same taxes. Similarly, you can give your family gifts before you pass away. Gifts of up to around $13,000 are tax-free.

Making the Tough Health Decisions

Even if you aren’t very old and you don’t have a lot of money, the Living Will is a vitally important document to draft and sign. The Living Will lets people know about the medical decisions you want to have made when you’re not able to make them yourself. For example, if you want to continue with life support even when the situation is dire, you can put that down in your Living Will.

Because any one of us could become medically incapacitated at any age, it’s important that you at least leave a Living Will with your attorney.

Problems to Avoid

There’s a good chance that if more Americans knew about the problems that occur in probate court – when estate planning issues are settled – they would do a better job at drafting their own wills. Leaving behind a lot of money to your second wife might be tax-free, but it can also cause a rift in your family. Leaving all of your money to the wrong third party could mean your family doesn’t see any of your money or property at all. These problems, of course, are to be avoided.

How to you ensure you avoid them? By working with a trusted and experienced attorney from the outset. By educating yourself about estate planning, as you’re doing right now. And ultimately, the best solution is that you take a proactive approach to your own estate. Make the decisions you don’t want a court to make for you. Put it all down in writing. Ask yourself the tough questions and be determined to come up with the right answers.

After all, who has the patience to put their estate planning off any longer?

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