Step 12: Keep It in the Family It is unfortunate, but accidents do happen. One moment we are enjoying life to the fullest, and the next we are in another world. We never know when that mysterious moment will arrive, but as a smart investor, you have prepared for that eventuality. You have seen an experienced estate-planning attorney to ensure all your affairs are in order. The will is done and necessary trusts have been established. You have anticipated everything to include potential estate and/or inheritance taxes, so the family should have no problem. They will get to keep the bulk of what you leave behind and the taxman gets nothing. That is right, isn't it?

Let's face it. There are certain things we must do to protect our family and our wealth. We don't like thinking about it very often, but think about it we must. We will die. When we do, unless we have prepared for that inevitable result, we may create needless heartache and loss for those we leave behind. Estate planning is appropriate at any stage of life. It is particularly appropriate as we prepare for retirement. Therefore, let's take a quick look at things we must consider.

It is no secret that every adult needs a will. Die without one, and the state decides what happens to your property. Rarely will the state's mandate follow what you would do if you had the opportunity to act. You have that opportunity through a will. So, see an attorney to complete one. It is not that expensive to prepare and it ensures your property will be distributed in accordance with your wishes. Do not use a preprinted, fill-in-the-blanks form will bought from a stationery shop or created through some of the software programs available for this purpose. These are often out-of-date and may not conform to the laws of your state. That penny saved may be thousands of dollars wasted after you die. Do see an attorney. After you complete the will, ensure you review it every five years, at a minimum, to verify its validity and conformance with state law.

Be aware of what counts as an estate asset for tax purposes when you die. Basically, that is everything you own, including the face value of life insurance policies and the current value of all your retirement plans. You may pass an estate of unlimited value to your spouse at death with no unfavorable tax consequences. When that spouse dies, though, there may be some heavy taxes that cause your children to receive far less than they should. Know that is possible and prepare for it.

Today, you may leave up to $675,000 tax-free to heirs who are not your spouse. If you leave those heirs anything above that amount, the excess will be taxed. Those rates start at 37% and quickly escalate to 55% from there. The exemption on the first $675,000 of estate assets is scheduled to increase annually until 2006, when it will be $1,000,000. Sounds like a lot, does not it? However, count the value of your retirement plans, your home, the face value of life insurance you own, and everything else, and that amount is readily reachable by many. Couples must begin to worry about the possibility of estate tax when their combined assets approach this figure. In today's world, with two workers in the family, this level can and will be reached with some frequency. Is it time to see the lawyer? If you want to protect the kids from Uncle Sam, the answer must be a resounding yes!

What if you become incapacitated, either mentally or physically? You might want to look into a durable power of attorney granted to someone you trust, such as your spouse or an adult child. You may also want to add a medical power of attorney. Both will allow the person you select to make decisions on your behalf. Without those documents, your family will be forced to hire an attorney, go to court, and have someone appointed as your conservator and/or guardian to make decisions and conduct business on your behalf. That is a needless, time-consuming, and costly process that can be avoided with one or two inexpensive documents that an attorney can prepare today.

Lastly, you may want to execute a living will. It is a silly name for a document that really says you want the right to die a natural death free of all costly, extraordinary efforts to maintain your life when that life can only be sustained by artificial means. This document is free in virtually every hospital in the nation. It makes such decisions easier on the doctor, the hospital, and your family. Used in conjunction with a medical power of attorney, this tool can spare your family a painful, drawn-out, and costly process. If you agree with this concept, then visit your local hospital, pick up the form, complete it, and let your loved ones know where it can be found.

Estate planning encompasses much more than a will. It may be true that you cannot live with lawyers, but you certainly cannot die without them. Use their talents to ensure things work the way you want. Estate planning is not a barrel of fun, but it sure is necessary

Now let's take a look at the next step insurance.