The estate planning process is a necessary step in making sure your assets and property is distributed as you wish. Congress has made changes to estate planning through the back and forth nature of estate taxes. Yet again, in 2013 the estate tax is going to change again. This can be frustrating to many estate planners since the federal rate has fluxed from zero in 2010 and creeping upward yet again this year.
Until January 1, 2013 you have up to $5 million of your estate exempt from federal tax. You can also gift up to $5 million individually before the new gift tax kicks in. Read more in Gifting millions before new tax law 2013.
Although the 2013 estate tax changes are still unknown, there are still several steps you can take to make your estate planning more streamlined and less intimidating.
AARP Estate Planning to do list:
- Professional Advice. Find a qualified estate planning professional who will listen to your needs and create a plan for you and your family. That’s the best assurance that your intentions would be honored.
- Health care power of attorney. Before you make the big decisions about who will get your estate, you need to make other choices about who will represent your interests with the doctors if you become incapacitated. You do this with a health care power of attorney. You need a living will, or health care directive, which addresses the health care needs of a principal when a principal does not have the capacity to make decisions him/herself.
- Financial power of attorney. This document is similar to a health care power of attorney, only it appoints someone to handle your financial affairs. This person should not only be trustworthy, but also understand something about finance or investing. This document may also be called a “property” power of attorney.
- Wills and trusts. Wills are essential, simple documents that everyone should have. Trusts can be drafted in addition to wills and serve more complex estate-planning needs. Property and other assets can be placed in the trust to shield them from taxes and from probate, the lengthy and expensive court process by which wills are executed. Instead, a trustee is appointed to manage the trust. That will simplify things once you or your spouse die.
- Gifts that can reduce your estate. Although the gift-tax exemption may change in 2013, couples can for now give away up to $10 million without paying federal gift tax. Talk to your estate planner about how gifts might reduce the value of your estate, and therefore the tax paid on it.
Read more about Estate Planning
A To-Do List for Estate Planning
By John F. Wasik, AARP Bulletin
October 19, 2011