Estate Planning Isn't Just for the Wealthy

You're taxed when you earn money, taxed when you spend money, and taxed on gains when you invest the money you have left over! And if you're not careful, you'll be taxed again -- when you die!

You may think estate planning is only for the wealthy. Think again. Under current law, the first $2 million of assets in an estate is exempt in 2007-2008. By 2009, that minimum jumps to $3.5 million. The estate tax is scheduled to be abolished completely in 2010. But don't bet your estate on that happening, as Congress struggles to find money.

It's quite likely that law will "sunset" in 2011 -- and the estate tax will go back to the pre-2001 level of $1 million. When you add up the value of your home, your retirement account, and even your life insurance benefits if you own your own policy, you could easily be paying huge taxes to both state and federal governments, if you die without an appropriate plan.

Estate planning is not all about money. A lot of planning involves making sure that whatever assets you do have are given to the people you want to have them. Titling assets in joint tenancy, or naming beneficiaries for your retirement plans, will not solve all those potential problems.

What You Need

Here are a few basic documents you should have in place -- even if you don't have a lot of assets.

• Revocable Living Trust: In most cases, this document is better than a simple will. It places your assets in a trust you create and manage while you are alive and competent.

  But when you die, or become incapacitated, the person you name as "successor trustee" can take over your affairs without petitioning the court, and is empowered to distribute your assets according to your directions after your death, without the time-consuming and expensive process of probate.

  While you are alive, you can buy and sell assets in the trust, reporting the gains or losses on your personal tax return.

  Important: Be sure to retitle assets such as your house, investment accounts and other property in the name of your trust.