Taking care of business.

Estate planning isn’t just for the wealthy. Nor is it simply for those contemplating the inevitable. It’s for everyone and it’s easy.

Simply put, estate planning is the best way for you to ensure that your family and financial goals are met after you’re no longer around to take care of them.

There are a few basic elements you will need to create in order to put your plan in place. These include a will, an assignment of power of attorney, and a living will or health care proxy (otherwise known as the medical power of attorney). Following are five easy steps to get you started.

1. Assess your assets and make associations.
   The first step is an inventory of your assets. Take stock of investments, retirement savings, insurance policies, and real estate or business interests. Then ask yourself three questions:
   • Who should inherit what?
   • Who should handle your financial affairs, if you’re ever incapacitated
   • And, who can you trust to make the right medical decisions for you should you ever become unable to make them for yours
     
     After you’ve made your assessments, this is a good time to talk with your family and heirs about your distribution plans. Inheritance can be a touchy issue, so discussing your intentions ahead of time can help prevent conflicts and misunderstandings. Talking with your prospective heirs might also provide you with greater clarification on who should get what.
2. Write your will.
   You need a will long before your golden years. A will allows you to have a say in who gets what, should something unexpectedly happen to you. It also serves as the best place to name your children’s guardians. If you die without a will, this could prove to be very troublesome and costly to your family. Either meet with an attorney to draw up a will or use one of the many online offerings.
   In addition to the will, you should also create an assignment of power of attorney and a living will or healthcare proxy, otherwise known as the medical power of attorney that will prescribe advance directives specifying the medical treatment you do or do not want at the end of your life.
   One last word on wills: make sure to update your will whenever there are any significant changes in your life, such as the birth of a child or the acquisition of property. This will help prevent any headaches or heartaches for your heirs.
3. Consider establishing a trust.
   Consult your lawyer about the advantages of establishing a trust.
   Trusts allow you to stipulate the conditions on how and when your assets will be distributed upon your death. A trust can also serve to reduce estate and gift taxes and to distribute assets to heirs without the hassle, costs, and unwanted publicity associated with the probate courts, that administer wills.
4. Consider the inevitable—taxes.
   When planning what and how much to give away, you need to keep in mind the federal estate tax exemption limit of $5 million, which is subject to adjustment for inflation. In 2013, estates of more than $5.25 million were subject to tax at a top rate of 40%. For 2014, estates over $5.34 million will be taxed at the same top rate of 40%.
   Also, remember although you can leave an unlimited amount of assets to your spouse, you’re likely only deferring and increasing the tax burden on the money that is left to your children. To reduce this tax burden ahead of time, for 2013 and 2014, you can give up to $14,000 a year as a gift to an individual (or $28,000 if you’re giving as a couple) and you can also pay an unlimited amount of medical and education expenses for someone, as long as you pay them directly to the billing institutions.
   Finally, you can also reduce your tax burden ahead of time by donating to a charitable gift fund or community foundation.
5. Consider life insurance.
   Life insurance not only can help you make sure your family is provided for, your child’s educational needs are taken care of, and that your children won’t have to worry about their future, but it can also help cover the costs of your estate in the end.
   If exemptions, gifts, and contributions don’t cover all the taxes and costs, life insurance is a positive way to help your heirs and family get through the division of your estate.
   Plus, life insurance is also a great way to say “I love you” after you no longer can tell your family this in person.