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Top suggestions in basic estate planning, P.2

In our previous post, we began looking at CNN Money's recommendations and advice concerning basic estate planning. Here we continue that discussion.

In terms of where to start on an estate plan, begin by taking inventory of all your assets. Three questions are particularly helpful: Who do you want to inherit which assets? If you become incapacitated, who do you want handling your financial decisions? If you become unable to voice your medical wishes, who do you want making those decisions for you?

Discussing estate planning matters can sometimes be a stressful thing. Many families experience unnecessary conflict because it isn't clear why certain persons inherited certain property. A good deal of this can be avoided by communicating you intentions during the estate planning process.

One thing to be aware of is that the federal estate tax exemption changes frequently, making it necessary to plan in such as way that allows for continual revision. In recent years, there has been a good deal of confusion regarding the exemption amount and where it is going. In 2009, the exemption was $3.5 million, and in 2010, there was no estate tax at all. In 2011 and 2012, the estate tax exemption is $5 million, but it remains to be seen what it will be after 2012.

As CNN Money points out, spouses may leave to one another an unlimited amount of money tax free at their death. Leaving all your assets to your spouse not necessarily the best approach to take, though, since it wastes your estate tax exemption and increases your spouse's taxable estate at their death. Children will likely have to pay more estate tax if they receive the assets at your spouse's death, and distribution decisions will have to be made at that point, which may be difficult.

Gifting can be an important part of any estate plan. Individuals may give up to $13,000 per year to an individual, and spouses may together give up to $26,000 to an individual. Payments of medical and education bills made directly to medical providers and educational institutions are tax free as well. Other charitable giving options exist, which can be explored with an estate planning attorney.

These suggestions only scratch the surface of the possibilities with estate planning. Some individuals may need more complex estate plans to see to their needs. Others want to keep it more simple. Whatever your approach, it is important to ensure that your goals are met and your loved ones cared for when you are gone.

Source: CNN Money, "Lesson 21, Estate Planning: Top Things to know."

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