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If you become ill or incapacitated, an estate plan specifies exactly how to handle your personal, financial and medical matters.
Your estate consists of everything you own - homes, insurance policies, retirement accounts, investments, bank accounts, cars, collectibles and other personal property. Without the proper planning, state laws dictate what happens to those assets, no matter what you intended to leave to a spouse, child or favorite charity.
Under current laws for 2013, the first $5.25 million of an estate is exempt from federal estate taxes, with any remaining assets potentially taxed at rates as high as 40%.
An estate plan can provide funds to pay any debts, taxes or expenses you leave behind, so your loved ones aren't forced to sell treasured assets to raise cash.
Certain estate strategies avoid a long, expensive probate trial that can cause complications, conflicts and loss of privacy for surviving family members.
Financial, legal and tax advisors should understand your unique needs and the estate laws in your state.
Start planning now to take advantage of estate strategies only available while you're alive.
Simply add up everything you own and subtract debts. Repeat this process regularly because asset values are always changing.
Who will inherit your assets? When? How? An estate plan should ensure that your wishes are carried out in a timely and tax-efficient manner.
Depending on your situation, advisors may recommend wills, trusts, powers of attorney, insurance policies and other estate planning tools.
Beneficiaries on insurance policies,
401(k)s, IRAs and annuities generally inherit those assets no matter what it says in your will.
Estate plans should also be reviewed and updated when you move to a state with different laws or experience major lifestyle events. Examples include a change in marital status, death in the family or significant increase in net worth.
For more specific information, you can visit www.irs.gov, and refer to Publication 950 - Introduction to Estate and Gift Taxes. Consult your advisor or visit our Build your portfolio section for helpful tips on building an investment portfolio to meet your estate needs and other financial goals.
The information above is not intended to provide and should not be relied on for accounting, legal and tax advice or investment recommendations. The views and strategies described may not be suitable to all readers. Please contact your financial professional or tax advisor for additional information.