Estate planning primer and mistakes to avoid

(10/27/2011) ERATE Exclusive - When it comes to financial planning, making smart investments and planning for the future aren't your only fiduciary considerations.

You also want to make sure your estate changes hands easily, after you are gone, without undue emotional or financial stress on those you leave behind.

Estate planning is the process of anticipating and arranging for the disposal of an estate. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses.

If you own property and have heirs, you need to think about estate planning. The best job requires a team of professional accredited estate planners such as a certified public accountant, a lawyer, insurance professionals and financial planners, and trust officers, according to the National Association of Estate Planners & Councils (NAEPC).

A good team can help reduce the professional fees that can add up if you don't manage the process well.

The NAEPC offers this advice on how to work productively with your planners.

• Before meeting with a professional, get all your docs in a row. Gather all your personal and financial information, make lists of your current financial advisers, assets and liabilities, collect financial documents such as retirement plans, life insurance policies, property deeds, partnership and business agreements and your income tax returns for the past two years.

• Write down your personal goals, concerns and ideas. Identify people whom you would like to have inherit your property when you die, and specify what you would like to leave each. Note any special needs or situations, such as a dependent child or a spouse whose disability will prevent him or her from working. Identify people you would like to name as guardian for minor children, if any, as well as an executor for your will.

• Hire only licensed, certified and otherwise qualified professionals. Seek referrals from family, friends, co-workers and others your trust, who've recently successfully planned disposition of their estate. NAEPC members, like those of other trade groups, complete rigorous and continuing educational requirements for estate planning and adhere to a strict code of ethics.

• Bring your notes, documents and information you've gathered to meetings with any estate professional. Being prepared saves billable time. Discuss your overall goals and find out how each professional can help you meet them. Ask for a list of the specific documents he or she will prepare for you.

• Estate planning is an ongoing process. Update your estate plan every few years or any time you experience a major life change, such as the birth of a child, marriage, divorce or death of a spouse or parent.

• Once you've prepared for your loved ones' financial future, don't forget to take care of their emotional well-being as well. Estate plan documents are unemotional reams of paper. Consider writing a letter to your spouse and family expressing your final thoughts and feelings. Keep the letter with key financial paperwork and make sure your loved ones know where to locate these items.

The NAEPC says these are the common mistakes to avoid in estate planning:

  1. Lack of planning.
  2. Unorganized finances.
  3. Not having a will, trusts and durable powers of attorney or advanced health care directive.
  4. Having out-of-date estate plan documents.
  5. Not coordinating life insurance and retirement plan beneficiaries and ownerships with estate plans.
  6. Not coordinating property title holdings with estate plans.
  7. Not having enough life insurance.
  8. Procrastination.
  9. Not telling people where your planning paperwork can be found.
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