Published May 2003

Get familiar with
estate-planning essentials

If you still have many years to go until retirement, drawing up an estate plan may not be among your higher priorities. 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Of course, you may be aware that the Tax Relief Act of 2001 repealed estate taxes for the year 2010, while reducing them gradually before then.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 for the year 2010 only, 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 fundamental elements of estate planning:

• Proper titling of assets. It’s important that all your assets — primary residence and other property, bank accounts, retirement plans, stocks, bonds, etc. — be titled in the proper form of legal ownership. You may want these assets listed in your individual name, in a form of joint tenancy or in the name of a trust.
• Beneficiary designations. You need to make sure that your beneficiary designations are 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.
• Wills. A will spells out how you want your assets distributed at your death. 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 dependent children.
• Trusts. For many people, a simple will may not be sufficient. For one thing, if you only have a will, assets may still have to go through the time-consuming and potentially divisive process of probate. A well-designed trust, if appropriate, can allow assets to bypass probate and give you more control over how and when those 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 make those decisions 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 both.

Today we’ve just looked at the “bare bones’’ of a few estate-planning elements. To get a fuller understanding of these issues, and to draw up a comprehensive estate plan, consult an attorney who is experienced in these matters. 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.

Eric Cumley is an investment representative with Edward Jones Investments at 1201-C SE Everett Mall Way in Everett. He can be reached at 425-353-2322. Edward Jones is an NYSE-member investment firm with more than 8,000 locations nationwide.

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