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Secure Your Children's Future and Protect Your Assets Through Estate Planning

March 16, 2012 | Comments: 0 | Views: 145

Estate planning is a means of arranging the disposition of a person's wealth after he's gone. Appropriate, conscientious estate planning eliminates vagaries, minimizes probate and maximizes the value your heirs will gain from your assets by sidestepping unnecessary taxation and other expenses.

Estate planning becomes extremely important for those who amass a great deal of wealth in their lifetimes, but it is important for everyone, regardless of their net worth, to have some kind of estate plan ready for the inevitable. Without foresight, your financial goals for your family may fall apart after you die. It can be an uncomfortable topic when you look at it from the standpoint of your own demise, but your real incentive is to set in place the foundation of a legacy that enhances the lives of the new generations that will follow behind you. Without a plan, your family and your estate will be at the mercy of the courts and governmental regulations.

The first piece of your plan must be to draw up a will. Dying without a will subjects your entire state to probate and a judge will distribute your assets according to his determination not yours. Many assume that their spouse will obtain all assets upon their death. This is a faulty assumption as their may be other claims on the assets, your spouse may perish with you or may perish before you.

Perhaps more importantly, by leaving everything to your spouse you are effectively giving up your federal estate tax exemption and increasing the amount that will be taxable when your spouse passes away. The so-called "death tax" has been a political football lately, so it's hard to say where it will eventually settle down. The amount you may leave to your heirs free of federal tax was $3.5 million in 2009, but in 2010 there was no estate tax at all for one year. It was set to come back with a $1 million exemption in 2011, but Congress raised it it a $5 million exclusion, indexed for inflation every January 1, and, for the time being, a surviving spouse may use the unused portion of exclusion of the spouse who passed first.

The maximum tax rate on your assets is now 35% - less than the 55% of previous eras, but still a very significant amount, with more than a million dollars going to the government on every $3 million of assets above the exclusion limit. If your assets are in land, property, or other tangible assets, things will have to be sold to pay the tax. There are legitimate ways to pass more cash and assets on to your heirs without the sting of tax, but it requires planning.

Gifts and trusts are effective means to give cash and assets to your heirs while you are still living. Permanent, not term, life insurance policies enable you to pass large sums on to heirs tax free. A healthy retired person is allowed to buy a $100,000 policy for $2,000 per year or thereabouts. Even if they wind up living to age 100 at which time premiums cease, they will probably still pay less than the face value of the policy and will have saved their heirs the $35,000 estate tax. With appropriate planning, life insurance can also be used to cover all applicable estate taxes.

There are many other issues to look at in estate planning as well. Setting up guardians for minor children, an executor, a power of attorney, a living will or healthcare proxy to stipulate what happens or who makes vital decisions if you become incompetent, are all important elements of a good estate plan. Your life's achievements are too important to leave to chance.

If you happened to have enjoyed the above piece, you may go and check out more similar content at Matthew Golba Financial Advisor or this alternative Matt Golba. web site.

Source: EzineArticles
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