An estate plan includes a will or trust, assignment of power of attorney, and a living will or health proxy. However, what you need to consider is how to choose the right estate plan for you. The following aspects may help you shape your unique estate plan.

Put Your Plan in Place

While estate planning is something that many of us would rather put off, the consequences of procrastinating on this important planning could be huge. Neglecting to set up an estate plan could mean: 

- Your bills are not paid if you die or become incapacitated 
- Your loved ones pay additional taxes on your estate that could have been avoided 
- Your assets may not be distributed to those who you would like to receive the assets 
- Your minor children may not have a designated guardian 
- Your assets are delayed in probate for a long time, costing your loved ones time and money

Designate Responsible Parties

Choosing responsible people to carry out your wishes is a crucial element of shaping your estate plan. Consider the following: 

- If you are creating a will, who do you wish to inherit your assets? 
- If you are creating a trust, who will be in charge of the trust? 
- For power of attorney, whom do you trust to make financial decisions for you? 
- Regarding your living will or health proxy, who are you comfortable giving the responsibility to make medical decisions for you?

For living will and power of attorney designation, consider the following: 

- Do you trust the person’s ability to carry out your wishes? 
- Is the person willing to accept these roles? 
- Can the person be easily reached in an emergency? 
- Does the person have good decision-making ability? 
- Does the person share similar philosophical or religious views, if this is important to you?

Check out this AARP article for information on different types of power of attorney, and learn about which types may be applicable to your estate planning.

AARP also has information on general considerations for choosing your executor or trustee at http://www.aarpsegundajuventud.org/english/finances/2008-SUM/08sum_crashcourse.html.

Decide Whether a Trust Is Part of Your Estate Plan

Depending upon your estate, you may set up a trust for asset management and disbursement after your death. A trust differs from a will in several ways: 

- The trust designates how and when assets are distributed after death.  
- A trust can offer lower estate and gift taxes than a will. 
- Trusts are not administered by probate court, but instead are administered by a designated trustee. Therefore, trusts avoid the publicity and the delay of the probate process.

Even if you have a trust in place, you should also have a will in place for assets that are not covered under the trust.

For more about living trusts, go to The Living Trust Network.

Familiarize Yourself with Federal and State Laws Regarding Estate Planning

The federal estate tax exemption defines the amount you may leave to your heirs without federal taxation. This amount may change over time, so it is worth keeping track of this and modifying your estate planning accordingly.

Check out this IRS Web site for information from the IRS on the estate tax.

States also may have an estate tax, which may be called an inheritance tax or death tax. See  this article at the Retirement Living Innovation Center for state-specific information on taxes, and scroll to the section titled “Inheritance and Estate Taxes.”

Becoming knowledgeable about current federal and state estate taxes can help you set up your estate and minimize tax liability.

Decrease the Sum Total of Your Estate

If you have a large estate, it may be advantageous for you to minimize your estate value while you are still alive. Federal law allows tax free gifts on an annual basis that can reduce the size of your estate.

The following types of gifts may be made without incurring a gift tax: 

- You are allowed to give a set amount per year, of money or assets, to as many people as you wish. 
- You may be able to give money for another person’s medical or educational expenses, if the money is paid directly to the medical or educational institution.

Consult the IRS Gift Taxes article at http://www.irs.gov/newsroom/article/0,,id=107815,00.html for current information on laws regarding gift tax exemption.

Additional Resources 

- Estate planning software: free downloads and options to purchase at http://www.smartdraw.com/exp/law/product/index.htm?WT.svl=learnmore 

- Legal HelpMate Web site:                                  http://www.legalhelpmate.com  
- American Bar Association (ABA):                       http://www.abanet.org/rpte/public/home.html  
- LegalAgreements.com                                       http://www.legalagreements.com