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Estate Planning, Giving the Most to Your Kids

During the next 55 years, Americans will enter the largest stage of estate transfers in U.S. history. The problem is that it isn't as easy as it used to be. You can't just have a will and name your heir. There is a lot more to it than that.

Most people figure that they can leave their home to anyone and it is a done deal. You see a lawyer and sign a few papers.

Unfortunately, it isn't that easy, especially with a 55% estate tax!

Here are some key points to remember when thinking about passing on your home and assets:

1. Don't get scared by the idea of planning for your death. Estate planning is a gift from you to your heirs. It takes time and commitment to make sure the gift is not a burden. Try to focus on the gift aspect and avoid the morbid tendency to cringe away from thoughts of our own mortality. Do you really want the state to get your home? Or would you rather your children receive it? Part of owning a home is planning for its future place in your family's life.

2. Talk about it. Don't keep your wealth and assets a secret. The more your heirs know, the better off they will be when the time comes to inherit.

3. Hire a good attorney who knows about estate planning. This is a specialized field, so be sure to find someone who specializes in it. You don't want to use just anyone. It could mean thousands of dollars difference to your heirs.

4. Learn the basics about estate planning. Find someone who can explain it to you. There are often seminars you can attend that go over the basics. Or you can pick up one of the many comprehensive books on the subject.

5. Take an inventory of all your assets. This includes your home, which is likely your largest asset.

6. Realize that your taxable estate includes everything you own, including your home, investments, retirement accounts, life insurance, and any share of jointly-held property.

7. Look into taxes. In 2000, estates up to $675,000 are exempt from federal taxes. This figure will rise gradually to $1,000,000 by 2006.

8. While you can leave an unlimited amount of money and assets to your spouse tax-free, this often isn't the best tactic. It only delays the question of what to do with the assets until the spouse's death. It is far better to prepare today for the inevitable.

9. You do need a will or living trust (depending on how complicated your estate is). Dying without one can leave things to the state and cut your family out completely, depending on where you live. It is better to bite the bullet and execute a will before it's too late.

10. If you are picky about how you want your assets handled after you are gone, you can create an irrevocable trust that has legal conditions on how the assets are distributed and used. These are extremely flexible and can be used to lightly direct your assets future or carry harsh rules and regulations. It is up to you.

11. According to U.S. law, you can give up to $10,000 per year to anyone without triggering gift taxes. This means you can start giving away money now if you wanted to without penalty to the heir. This can help reduce your estate while still alive.

12. There are also some new ways to relieve your estate of funds without penalty in the form of charitable gift funds and community foundations. If you are in a philanthropic mood, you can donate your home to a charity to spare your heirs the taxes.

Source: Based on information from Money Magazine.

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