Estate Planning Basics / Overview Top Ten

CNN & Money Magazine has a pretty good basic introduction to estate planning that may be valuable to review prior to speaking to an estate planning attorney and which explains why a will or trust is just one part of a comprehensive overall estate plan, and why estate planning is not just for the wealthy:

1. No matter your net worth, it's important to have a basic estate plan in place.

Such a plan ensures that your family and financial goals are met after you die.

2. An estate plan has several elements.

They include: a will; assignment of power of attorney; and a living will or healthcare proxy (medical power of attorney). For some people, a trust may also make sense. When putting together a plan, you must be mindful of both federal and state laws governing estates.

3. Taking inventory of your assets is a good place to start.

Your assets include your investments, retirement savings, insurance policies, and real estate or business interests. Ask yourself three questions: Whom do you want to inherit your assets? Whom do you want handling your financial affairs if you're ever incapacitated? Whom do you want making medical decisions for you if you become unable to make them for yourself?

4. Everybody needs a will.

A will tells the world exactly where you want your assets distributed when you die. It's also the best place to name guardians for your children. Dying without a will - also known as dying "intestate" - can be costly to your heirs and leaves you no say over who gets your assets. Even if you have a trust, you still need a will to take care of any holdings outside of that trust when you die.

5. Trusts aren't just for the wealthy.

Trusts are legal mechanisms that let you put conditions on how and when your assets will be distributed upon your death. They also allow you to reduce your estate and gift taxes and to distribute assets to your heirs without the cost, delay, and publicity of probate court, which administers wills. Some also offer greater protection of your assets from creditors and lawsuits.

6. Discussing your estate plans with your heirs may prevent disputes or confusion.

Inheritance can be a loaded issue. By being clear about your intentions, you help dispel potential conflicts after you're gone.

7. The federal estate tax exemption - the amount you may leave to heirs free of federal tax - has been rising gradually and will hit $3.5 million in 2009.

Meanwhile, the top estate tax rate is coming down. The estate tax is scheduled to phase out completely by 2010, but only for a year. Unless Congress passes new laws between now and then, the tax will be reinstated in 2011 and you will only be allowed to leave your heirs $1 million tax-free at that time.

8. You may leave an unlimited amount of money to your spouse tax-free, but this isn't always the best tactic.

By leaving all your assets to your spouse, you don't use your estate tax exemption and instead increase your surviving spouse's taxable estate. That means your children are likely to pay more in estate taxes if your spouse leaves them the money when he or she dies. Plus, it defers the tough decisions about the distribution of your assets until your spouse's death.

9. There are two easy ways to give gifts tax-free and reduce your estate.

You may give up to $12,000 a year to an individual (or $24,000 if you're married and giving the gift with your spouse). You may also pay an unlimited amount of medical and education bills for someone if you pay the expenses directly to the institutions where they were incurred.

10. There are ways to give charitable gifts that keep on giving.

If you donate to a charitable gift fund or community foundation, your investment grows tax-free and you can select the charities to which contributions are given both before and after you die.

CNNMoney.com, "Money 101 - Lesson 21: Estate Planning, Top Things To Know", not dated (but apparently up to date as of this posting).

FAQ: How much to form a corporation? Review a contract? Draft a living trust?

As an attorney, I am frequently asked by potential clients some variation of the following question:

How much to form a corporation, to review this contract, or to draft a living trust?

Usually, the honest answer is, it depends (although this tends not to be what the questioner wanted to hear). Legal services are professional services more akin to those offered by doctors or even automobile mechanics than to purchasing a fungible item like a television. With a TV, you know what you're getting before you buy, and you can price shop amongst competitors, because you know the product is going to be the same regardless of where it is purchased. Conversely, when you visit the doctor, you know you need a check-up or aren't feeling well, but until you get in there and the physician runs some tests, you aren't going to know how much it will cost. Asking an attorney, 'How much to fix X problem?' is often times akin to asking a doctor, 'How much to make me better?' or your mechanic, 'How much to fix my car?' You could ask what a doctor's visit costs, but one doctor's visit may not cure you. Likewise, you can ask me about my flat rate incorporations, but you may also need contract, employment, trademark, or other legal work, and in fact, a corporation may not be the best entity for you, so the number quoted must be put into context.

For contract negotiation, drafting, review, and counsel, my rates are hourly, and the final fee will depend on a host of factors. The fact that an agreement to be reviewed is five pages long is only one of these factors; the others will remain unknown until you sign on with me and I actually dig into the issues. (Just as your mechanic won't be able to determine what labor and parts are needed to repair your vehicle until you have paid him to look under the hood.)

Further, clients may not realize what they need. The question, 'How much for a living trust?' ignores that a living trust may not be needed at all, one living trust alone may not be sufficient, and that proper estate planning involves more than just drafting a revocable living trust (and even that is customized for each client's needs).

In summary, just as with the doctor and mechanic, some small leap of faith is required of the potential client. You must hire an attorney to analyze your circumstances and advise you; the component parts of the solution may have flat fees knowable in advance, but some legal work may additionally be recommended or even required to get where you want to go. After all, part of what you are hiring the lawyer to do is identify legal issues of which you might not be aware. Seen in this light, calling around to attorneys to compare prices for an LLC or a trust may give you an idea of the fee level, but the answers will rarely be precise, and others questions may be at least as useful. As a last resort, of course, you can always take your legal business elsewhere if your first choice for an attorney proves unsatisfactory, or you feel you are being overbilled.