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Why Should I Plan My Estate?

Estate planning has many purposes.  Above all, it is to ensure that your assets pass to family members, friends, charity, or others in the way that you desire. 

The reason for estate planning is to achieve peace of mind, both for yourself and your loved ones.  By completing the necessary paperwork now, you can ensure that your wishes for family members are fulfilled.  Without any estate planning in place, state law may lead to unwanted and unfortunate results.

What is an estate plan?

An estate plan is a series of legal documents that provide for the control or disposition of your assets in the event of your incapacity or death. There are a variety of documents that may be employed for this purpose. Your attorney can advise you as to what documents are appropriate for your particular circumstances.

Who needs an estate plan?

Everyone should provide for an orderly disposition of their assets in the event of their death. However, it is especially important for couples with minor children to provide for their care and support in the event of the death of both parents. If you don't make these important arrangements the state will make them for you. When couples children are no longer minors and they approach retirement age it is another important time to make theses important arrangements.

How do I go about planning my estate?

The first step in the process is to determine your personal net worth (and that of your spouse, if you are married).  I have provided a worksheet to help you compile and organize this information.  You will be asked to list all of your assets of every kind by approximate value.  You will also be asked to include all of your liabilities (debts), again approximating the amounts owed.  Your assets minus your liabilities equals your net worth, which is a rough approximation of your gross estate were you to die at this time.

But because no one expects you to die anytime soon, the next step is to make some reasonable projections about the future.  Do you expect your assets to increase between now and the date of your death?  Will your liabilities be reduced?  What about inflation?  If your net worth grows at just 5% per year, it will double in just over 14 years!  You should also plan for any changes you might make in your life insurance, if you already have a policy.  Also consider whether you are likely to receive any inheritances from parents or others.  After completing this process, you will have made a reasonable assumption about what your estate will look like at some future date.

At this point, you can determine whether your estate may be subject to federal and state estate taxes upon your death.  As of 2005, estates in excess of $1,500,000 are potentially subject to federal estate taxes, while estates in excess of $675,000 are potentially subject to New Jersey death taxes.  If your estate is well below these figures, you probably do not need to concern yourself with tax issues.  If your estate is close to this figure or above it, you need to address various means of preparing for and reducing the amount you may owe.

Why should I prepare a will?

    1)      To provide for your minor children.  --  If you have children under the age of 18, your unexpected death could mean that the county Probate Court will appoint a guardian to take care of them.  This guardian may or may not be the person who you would have chosen.  With a will, however, you can help ensure that a person of your choosing is appointed as your children's guardian.  Your will can also make sure that your children's property is managed by the person of your choosing.

     2)      To provide for your spouse and other loved ones. – A will can make sure that your assets are properly distributed to your spouse and other family members or friends.  If you do not execute a will, the Maine laws of "intestate succession" take effect, distributing your property under a set of default rules.  These rules generally leave your property to your relatives, but often not in the way you would do so if you had a chance to make the decisions yourself through a will. 

    3)     To leave a charitable legacy. -- Unless you make charitable gifts through a will, it is very unlikely that any of your assets will go to a charity. 

What is a Durable Power of Attorney and why should I prepare one?

A General Durable Power of Attorney allows you to appoint an agent (typically referred to as an "attorney-in-fact") to make your financial decisions for you if you are incapable of making them for yourself. The power of attorney is designed to avoid the expense and time delay involved in petitioning the court for the appointment of a conservator. It also allows you to appoint a guardian of your choice in the event that a court appointment becomes necessary.

What is an Advance Health Care Directive and why should I prepare one ?

An Advance Health Care Directive is essentially a Living Will.  This document allows you to give instructions on certain medical decisions in the event that you are unable to make such decisions yourself.  You may also appoint an agent to ensure that your instructions are carried out.  You can give your agent instructions as to what type of medical care you want or do not want, including the authority to withhold or withdraw life-sustaining procedures, if you so desire.

Parag P. Patel, Esq. is an estate planning attorney and may be reached for afree consultation at (800) 857-0546 or patellaw@mail.com. Opinions expressed in this article are not intended to be a substitute for specific individual tax or legal advice.