Get Familiar With Basics Of Estate Planning


If you still have many years to go until retirement, you may not consider drawing up an estate plan to be a high priority.

And yet, as long as you have a family and financial assets, you do need to think about estate planning — no matter what age you are.

Of course, you may be aware that the Tax Relief Act of 2001 repealed estate taxes for the year 2010, while reducing them gradually before then.

Doesn’t that mean you don’t have to worry about burdening your heirs with estate taxes?

It’s not quite that clear. Current law repeals the estate tax only in the year 2010 and there is uncertainty over what will happen in the following years.

Laws affecting estate taxes could easily change many times over the next several years.

Also, comprehensive estate planning covers more than just taxes.

You still need to determine who gets what. You still want to reduce costly and expensive delays in distributing your estate.

And you still need to make arrangements to have someone act in your best interests if you become incapacitated.

To address these and other issues, start familiarizing yourself with these basic elements of estate planning:

• Proper titling of assets: It’s important that all your assets — your house, property, bank accounts, retirement plans, stocks, bonds, etc. — be properly titled, in terms of legal ownership.

You may want these assets listed in your individual name, in joint tenancy, or in the name of your living trust.

• Beneficiary designations: You need to make sure that your beneficiary designations are always updated and consistent with your overall estate plan.

For example, if you name a spouse as a beneficiary on your life insurance, and you later divorce and remarry, you’ll need to change the beneficiary on your policy.

• Will: A will spells out how you want your assets distributed. If you don’t have a will, your assets may be distributed according to state law. If that happens, your heirs may not get what you had intended for them to receive.

A will is also the document in which you can name a guardian for small children.

• Living trust: For many people, a simple will, by itself, may not be sufficient.

For one thing, if you only have a will, your assets may still have to go through the time-consuming and potentially expensive process of probate.

A well-designed living trust, though, can bypass probate and give you more control over how and when your assets will be distributed.

• Durable power of attorney: When you set up a durable power of attorney, you name someone to act for you if you become mentally or physically unable to make financial and legal decisions on your behalf.

• Health care directive: By drawing up a health care directive, you authorize, in advance, the kinds of health care you would or would not want if, for whatever reason, you cannot communicate for yourself.

In your health care directive, you can name someone to make health care decisions for you, leave written instructions to help others in making those decisions or even do both.

We’ve just looked at the bare bones of all these estate-planning elements.

To get a fuller understanding of these issues, and to draw up a comprehensive estate plan, consult a legal adviser who is experienced in these matters.

And once you’ve got an estate plan, revisit it periodically to make sure your arrangements reflect the changes in your life that will invariably come your way.

Scott Flake is a financial adviser with Edward Jones. He hosts a weekly informal investment discussion on Tuesdays at 10 a.m. at the Good Samaritan Majestic Rim at 310 E. Tyler Parkway. For more information, call his office at (928) 468-1470.


Use the comment form below to begin a discussion about this content.

Requires free registration

Posting comments requires a free account and verification.