Do you need a trust, power of attorney, or health care directive in addition to a will?
Most Americans don’t have a will, to say nothing of a more comprehensive plan to avoid probate, save your family time, money and stress or save on estate taxes. Do you need to start planning what happens to your estate when you die? Yes. The sophistication of your plan depends on your age, health, wealth, and innate level of caution.

You're in Your Twenties and Single
At your age, there's not much point in putting a lot of energy into estate planning. Unless your lifestyle is unusually risky, you are already wealthy, or you have a serious illness, you may not need anything but a will. A will is a must-have document.

You Have Young Children
First and foremost, you must have a will to protect your family. A will allows you to leave your property to whomever you choose and, more importantly, names a guardian to care for your children. The guardian will take over if both you and the other parent are unavailable. If you fail to name a guardian, a court will appoint someone, possibly one of your parents.  Note that if you don’t have a will, two-third (2/3) of your property may go not to your spouse, but directly to your children. The problem with the children inheriting directly is that the surviving parent may need to get court permission to spend or invest the money -- a waste of time and money in most families. First, get a will.  Second, think about buying life insurance to replace your earnings, just in case. Term life insurance is relatively cheap.

You're in Your Forties
This is the time when most people consider estate planning in earnest. Keep in mind that your assets and what you want to do with them may change in 5 or 10 years -- be prepared to revisit and change your estate plan at least every 5 years. First, create a will, and then consider some of these other planning options:

Revocable Living Trusts
To save your family the cost (and hassles) of probate court proceedings after your death, think about creating a revocable living trust. It's more complicated than a will, but it avoids probate. It lets everything you put in the trust go directly from your trust to your heirs after your death without having to go through probate court.  While you're alive, the trust has no effect, and you can revoke it or change its terms at any time. But after your death, trust property can be transferred quickly, according to the directions you left in the trust document. Remember though, only the assets you actually transfer into the trust are controlled by the trust.

Payable-on-Death Accounts
There are other, even easier ways to avoid probate for some types of accounts: You can turn any bank account into a "payable-on-death" account simply by signing a form (the bank will supply it) and naming someone to inherit whatever funds are in the account at your death. You can do the same thing, in almost every state, with securities and retirement accounts. CAUTION:  If you add someone to an account for convenience, most banks will treat your account or CD as a "payable-on-death" account, even if that is not what you intended.

Reducing Estate Taxes
If you have enough property to worry about federal estate taxes, think about tax avoidance as well. In 2010, there is no estate tax; however, congress has indicated that they will reinstate the estate tax in 2010, retroactively to January 1^st. It is speculated that if reinstated the estate tax law will tax only estates worth more than $3.5 million, but in the current political climate, Congress is expected to revise the estate tax laws and it could be much lower (e.g. estates worth over $1 million are taxed! If congress does nothing before 2011, that is exactly what the law will be.) If estate tax does take a bite, it can be a big one: 45% to 55% of everything over the exempt amount. Here are some ways to reduce estate tax:  Give your property away before death. One way to reduce these taxes is to give away property before your death. After all, if you don't own it, it can't be taxed. Gifts larger than $12,000 per year per recipient are subject to gift tax, at the same rate as estate tax. Still, an annual gift-giving plan can reduce the size of even a big estate, especially if you have a covey of kids and grandkids. Gifts to your spouse (as long as he or she is a U.S. citizen), direct payment of tuition or medical bills, and gifts to a tax-exempt organization are exempt from gift tax.  Create an AB trust (also called a credit shelter or bypass trust). Another way to cut estate taxes is with trusts. Many couples use an AB trust to leave the maximum amount of property exempt from taxes to each other for life, and then to their children. The surviving spouse can spend trust income and, in some circumstances, principal. An AB trust can shield up to twice the exempt amount from estate tax.  Create a charitable or other trust. Charitable trusts, which involve making a gift to a charity and getting some payments back, can also save on both estate and income tax. There are many other complex trusts; learn about them on your own and then have an experienced estate planning lawyer draw up the documents you want.

You're Over Fifty or Ill
If you have not done it before, now is the time that you must take concrete steps to establish an estate plan with more than just a will. First, the basics: Consider a probate-avoidance living trust and, if you're concerned about estate taxes, a tax-saving trust. (These devices are discussed just above.) Get a will, or update an old one.  Then take a minute to think about the possibility that at some time, you might become unable to handle day-to-day financial matters or make healthcare decisions. If you don't do anything to prepare for this unpleasant possibility, a judge may have to appoint someone to make these decisions for you. No one wants a court's intervention in such personal matters, but someone must have legal authority to act on your behalf.  You can choose that person yourself, and give him or her legal authority to act for you, by creating documents called durable powers of attorney. You'll need one for your financial matters and one for health care. You choose someone to act for you (called your agent or attorney-in-fact) and spell out his or her authority. You can even state that the document won't have any effect unless and until you become incapacitated. Once signed and notarized, it's legally valid, and your mind can be at ease.  We will discuss the need for a Power of Attorney in more detail later, but in my opinion, no matter your age or health, it is best to have one.

wbell@mbnlaw.com