Creating a will

If there are specific people or institutions you’d like to enjoy your assets someday, and if there are people who depend on you for financial security, you need to plan for what will happen to your assets after you die. The more estate planning you do today, the more confident you can be that your wishes and your responsibilities will be handled as you intend.

For most people, estate planning goes beyond simply deciding who gets what and drafting the legal documents required to ensure that those transfers happen — though both are essential parts of the planning process. You also need to make sure your loved ones will be protected whether you die next week or 50 years from now.

This involves making decisions as diverse as who should be the beneficiary of your retirement plans, who will look after your children if you die before they turn 18, what will happen to your business, and how much life insurance you need to provide income for your family.

You also need to consider who should make medical and financial decisions for you if you are unable to do so. And you’ll want to be sure that the person authorized to make those decisions knows what your wishes are and is comfortable acting in that capacity.

Finally, you want to do all of these things in a way that minimizes potential estate taxes and administration expenses so you can pass the maximum amount of property to your heirs.

Estate tax bite
You may associate estate planning with minimizing estate taxes, but in fact most people’s estates don’t have to pay federal estate taxes under current law. In 2008 the first $2 million in potentially taxable estate value is excluded. The exemption rises to $3.5 million in 2009. In 2010 there is no federal tax on estates of any size. Unless Congress makes the tax repeal permanent, however, the estate tax comes back in 2011 with a $1 million exemption.

In addition, many states impose estate and sometimes inheritance taxes. So you’ll want to check with an attorney familiar with the laws in your state for specific information on what your estate may owe to the state when you die.