Private Annuity Trusts - Supercharge Your Retirement

Writen by Paula Straub

You have made some great investments in Real Estate or in a Stock Portfolio. Congratulations! Now you are ready to retire on your gains. But wait. To benefit from your investment appreciation, you’re going to have to sell some or all of those assets.

If you sell your investment property, you will need to pay capital gains tax to the Federal Government, State, and you will also pay recaptured depreciation. If you’re in California, add another 3 1/3% in withholding. That’s a huge chunk of change, and a big blow to your savings.

If you sell your stocks, you’ll be giving up at least 15% to capital gains. There is also no guarantee that the long term capital gains rate will remain at 15% forever. It could increase down the road.

How can you start receiving income but not get hit with huge amounts of tax?

For real property, there is a 1031 exchange into a tenant in common property. This works well for investors that don’t want to manage property anymore, but still enjoy the benefits of real estate ownership. This is a subject covered in many of my previous articles.

There is another powerful concept. It’s called a Private Annuity Trust. These trusts have been around since 1939, but until the last few years have primarily been used for Estate Planning purposes. The Private Annuity Trust also works extremely well for Retirement Planning. It is fairly complex to set up and administrate, so many financial planners, real estate brokers, CPAs and Attorneys still don’t know much about them.

The procedure is basically this.

1. A Private Annuity Trust is established. You, the seller become the annuitant.

2. A fair market appraisal is done to determine property value.

3. The seller can negotiate a sale price at the appraised value.

4. The property is transferred to the trust and the trust is now the seller of the property and retains the proceeds.

5. The proceeds are invested by trustees (not the annuitant) and an arrangement is made to pay the annuitant (and perhaps their spouse) in monthly payments for the remainder of their lives. The capital gains tax is spread out over the course of your lifetime. If you pass away before your estimated average calculated life span, the remainder of the assets pass to the beneficiaries. The balance will be passed free of Estate Tax, Gift Tax, Generation skipping tax, and Transfer tax. Any capital gains tax still due will be paid before disbursement.

6. Other properties or stocks can be added to the trust at a later time, and recieve the same benefits.

As an example, let’s say you have a million dollar gain on a property. You might very well owe 350K in taxes. With a Private Annuity Trust, all one million goes to work for you, and you can receive montyly income for the rest of your life. The exact amount is determined by your age and the time you choose to begin receiving your payments. You have the option to defer receiving payments until the age of 70 1/2. This allows the assets to grow compounding and tax deferred, and allows for greater income in the future.

The trust removes the assets from your estate, as the trust now owns them and the annuitant relinquishes control over how they are invested.

Setting up a Private Annuity Trust can definitely give a turbo boost to your retirement bottom line. Ask yourself, would you rather give a “gift” to the government in a big lump sum, or would you like to pay in small chunks and have the bulk of your profits working for you and earning compounded interest for years to come?

Paula Straub will guide you through the process of keeping your Capital Gains working for you and generating passive income. To receive your invitation to her free teleconference, visit Save Capital Gains Tax

Estate Planning - Real Property Disbursement Problems

Writen by Ronald Hudkins

Many parents want to give an equal share of the family home or some other sentimental form of real property (actual land usually) to their surviving children in equal shares. As an estate-planning attorney, one often sees the strange problems created by such plans. In particular if there are an even number of children, this may create hardships as voting blocks of family members eventually have to resolve votes that are evenly split in court or at least face the hardship of that choice among their siblings.

Suppose, for example, that well-meaning parents leave the family home to four children who are well intentioned adult human beings who generally wish to treat each other fairly, as family members often endeavor to. The problem is that four children will usually have some important differences in age, lifestyle and financial needs. When four such people own property, they must all pay a fourth of the tax and of the general maintenance and upkeep of the property. Suppose one of the children is unsentimental about the family home and wants to sell the property to finance a business or vacation, and two of the other children want to keep the family home to gather for Christmas (or any other important holiday). The fourth child has a hard time deciding, but is also having financial difficulty paying their share of the taxes, maintenance and upkeep. In order to keep the home and avoid going to court, the two children who wish to keep the home will have to pay the other children what their shares of the property are worth. This can create definite hard feelings even if the children who wish to keep the property have the ability to pay the others for their interest in it. When family Christmas (or any other important holiday) comes around, the children who sold their share of the property will feel badly about using it for the celebration of Christmas around their siblings who had to pay to keep it. By the same token, the children who had to pay to keep it may feel awkwardly about having to share it with their siblings whom they had to pay. This kind of thing can create long standing rifts in a family, difficulty between relatives who formerly got along well together.

The problem, from an estate-planning point of view, is that the property was given in equal shares to prevent any of the children from having their feelings hurt or feeling less loved and important than the other children. If, an estate planner does not help their clients see this possibility, for it is a very likely situation in the real world, it is felt that they (the attorney) have failed. Unless the family is extraordinarily wealthy the possibility that they will have differing financial needs is very common. Anyone who is a middle class American is usually at some point in need of money, particularly if they have children.

It is important for both the client and the attorney to face tough questions and to look toward non-idealized versions of the future when crafting estate planning strategies. The problem of the four children is easy enough to fix, but it illustrates a more important principle. When you are ready to start your estate planning it is important that you answer hard questions for yourself. Clients should be asked questions about how they have seen other families handle wills after their loved ones have passed on. Usually the client is able to tell stories about the greedy children or relations of others, and that helps broach subjects that might otherwise be difficult to bring up. When you prepare to visit your estate planner remember the worst family you ever heard of and imagine that part of the problem that they were having is because bad estate planning forced them to do things they might not otherwise have done. If there is any skill estate planners try to hone, it is the ability to talk to their clients about why they are asking for certain bequests and to help them see that there are several options to reach the goal they are seeking, rather than offering them a cookie cutter version of a will or trust.

About Ronald E. Hudkins;
Ronald Hudkins is a retired U.S. Army Military Police member that was assigned as a staff researcher. He has coordinated with military and criminal investigators, set on court marshals and worked closely with the Staff Judge Advocate Generals’ Office (JAG). He has a keen sense of legal matters - their interpretation, initiatives and guidelines. For imperative financial planning needs he suggests his book “Asset Protection and Estate Planning for All Ages.” Additionally, he offers a Free Newsletter at his web site: http://www.AssetProtectNow.com

Estate Planning - Rules and Trustees

Writen by Ronald Hudkins

If you are wisely attempting to put some assets into a trust (inter vivos) in your lifetime, then you have been paying attention to the important differences between wills and trusts. A trust created during your life will be far more secure with respect to its ability to withstand challenges to how your assets are to be distributed during estate planning than a will. Making a trust is a brave thing to do, because it telegraphs, to a certain extent, what you are going to do with your assets while you are still alive. This is what insulates it from attacks on your capacity, because it is unlikely, for example that, one of your relations is going to say you are insane or feeble and unduly influenced by another of your relatives to your face and this makes the trust a far surer bet than a will, in some cases.

However, the trust also may engender hard feels regarding the exclusion of a relative and those feelings will become known to a person creating a trust while they are still alive. This is the advantage of a will — if people don’t like it, you will never know. The will maker is long gone when those that don’t like what they have done contest the will and those that do like it try to defend it. Although, it should be noted that clever drafting should be able to alleviate the necessity of either a contest or a defense. That is why you need a clever estate planning attorney to create your will rather than just a form. The attorney that creates your will often defends its contents, or in other words, their understanding of your wishes. The trust is a different story, because your trust will be administered by someone (called the trustee) for the purpose of those that the trust benefits (the beneficiaries).

One of the paramount problems of forming a trust is deciding what powers the trustee has and what powers they do not have relative to the assets you have placed in trust. Remember that a trustee is already assumed to have a duty to benefit the trust and that many states have laws regarding what a trustee can and cannot do, if the settlor (the creator of the trust) does not specify otherwise. But, again, you don’t want to leave the financial destiny of your trust up to the state any more than you want the state to decide who gets your assets. Your wills and trusts attorney will be able to give you a list of the traditional powers of a trustee in your state and tell you what they mean.

Many of the powers concern what type of assets the trustee can invest in on behalf of the trust. For example, the trustee is sometimes prohibited from buying general securities for the trust because they are considered too risky. But, if you have chosen your trusted stock broker as your trustee and she has agreed, then this might be exactly the restriction you don’t want. Consult with your attorney about the kind of trust you would like to create and what the rules are in your state. Remember, that these rules are there to cover the bases in case you don’t make your own rules. Understanding the rules that are there, and why, will give you a sense of the kinds of rules that might be good and the ones that you would rather not have. In addition, you will be able to give the trustee more freedom than the state rules would allow, or less, depending on how conservatively you want your assets to be managed.

Be prepared to have a candid conversation with your attorney regarding what the rules are and what you would like to see happen. It is good to remember that your estate planning attorney has seen many trusts and understands how they work. Sometimes restrictions that seem good today might be the very restrictions that cripple your trust in a vastly different economic environment. In some cases, a trust may span several decades and the trustee may change along with the climate the trust was created in. When radical economic changes have occurred, a trust with greater flexibility will be beneficial. So you have a lot to think about as you enter the exciting world of forming a trust. Don’t let rules be off-putting, they are there as guides and when you understand them you will have a greater understanding of what you need. Ask your estate planner to give you information about the current rules and some general advice about how to choose a trustee.

About Ronald E. Hudkins; Ronald Hudkins is a retired U.S. Army Military Police member that was assigned as a staff researcher. He has coordinated with military and criminal investigators, set on court marshals and worked closely with the Staff Judge Advocate Generals Office (JAG). He has a keen sense of legal matters - their interpretation, initiatives and guidelines. For imperative financial planning needs he suggests his book “Asset Protection and Estate Planning for All Ages.” Additionally, he offers a Free Newsletter at his web site: http://www.AssetProtectNow.com

Private Annuity Trust, Charitable Remainder Trust or 1031-TIC: Which Is Right for You?

Writen by Paula Straub

I’ve written a lot about how a PAT or a CRT or a 1031-TIC might be right for other people, but how do you decide if one is right for you? There are several things you should think about when trying to choose between these three options:

1) Are you at a place in your life where you want to accrue assets or do you want to distribute them?

If you are still trying to accrue assets, you may want to use a 1031-TIC vehicle to generate income and save capital gains tax because you don’t lose control of the asset like you do with a PAT or a CRT. Both a PAT and a CRT allow you to distribute assets out of your control and out of your estate.

How do you know if you should be trying to accrue or distribute assets? If it is possible that your assets will outlive you, then you are probably in a distribution phase of your life. Let me give an extreme example to clarify. I have a friend whose grandfather died at the age of 85. On his death, the man left the entirety of a $20 million estate to his 92-year old wife of almost 60 years. The assets of my friend’s grandmother will outlive her. She is in a distribution phase of her life. It is more complicated than being old with lots of money, however. As another example, I know of a widow in her 90s who, though she will be able to leave some sort of legacy to her family, is not really in a position to distribute assets. About 15 years ago, when she and her husband where in their 70s, they had about $2 million in assets. They figured that given their age and the amount of money they had, they should begin to distribute their wealth. So they did. They had to cease distributing assets, however, when the husband died a slow death of cancer in his early 80s. His healthcare in the last year or so of his life ate up a big chunk of the estate. As well, after this death, the widow was unable to care for herself, so moved into an assisted living facility. She has lived in various such facilities for over 10 years now. She has significant healthcare costs, but she is not in such poor health - indeed she has no major diseases - that she won’t live another few years. She has had to use almost all her estate to care for herself. She is not in a distribution phase of her life.

As you can see, It can sometimes be difficult to figure out where you are in your financial life, but you should consider your age, health and family medical history, and the value of all your assets and the likelihood that they will appreciate or continue to generate income as you age.

2) What type of asset do you wish to sell?

A 1031-TIC deal will only work with investment real estate. You can’t sell use your own residence or a second home. You can use commercial or residential rental property. If you’re looking to sell commercial assets or other highly appreciated illiquid assets, a PAT or CRT may work better for you. As I’ve mentioned in an earlier post, securities can be sold through a PAT, but not if they’re in a restricted account like a 401K or an IRA.

3) Do you need income now, or later in retirement?

A 1031-TIC deal generally provides income immediately, but there are properties such as land deals which allow you the opportunity to accrue appreciation without taking income. A PAT and a CRT can provide income immediately, but income from either trust can also be delayed. In the case of a PAT, your receipt of the income can be delayed until you are 70

Choosing Guardians for Children

Writen by Jamie Kahn

The most important decision you’ll make in your estate plan is appointing guardians for your minor children. Who you pick will impact not only your children but also the lives of your guardians. While you and your children may feel an affinity for a particular adult(s), that relationship could be strained in a 24-hour-a-day, 7-day-a-week environment. Where should you begin in picking a guardian?

Unless you have a parent or relative who has expressed in past conversations a overwhelming desire to be your child’s guardian, start listing family and friends with similar aged children. Potential guardians with older children may be looking forward to becoming empty-nesters and recent empty-nesters are likely enjoying their new freedom.

Consider the reversal of roles since many families reciprocate in being guardians - look at families whose children you would be willing to take custody. Have their children been raised with similar values that compliment yours? More to the point: do the parents of a potential family handle any given situation in a similar manner to you?

Let potential guardians know you are just starting to explore potential guardians. Take time to talk to several families, your children if they are old enough for such discussions and talk to your extended family about whom you are considering to be guardians. These discussions can generate other considerations and reveal overlooked potential guardians.

Many estate plans list primary and backup guardians. Your guardians are appointed in your Will. Some families opt to include a Revocable Living Trust in their estate plan to control distribution of assets to children until they reach an age or set criteria to ensure they are responsible to inherit money. Your guardians do not need to manage your estate’s finances and it’s sometimes wise to have your guardians separate from your revocable living trust’s successor trustees.

The alternative to not appointing guardians quickly is allowing the state your live in to appoint guardians for your children - possibly someone who is not your first or second choice to act as such.

Will the Estate Tax Ever Go Away?

Writen by Thomas McNally

The “Estate Tax” is the tax that the government puts on the assets that are transferred to your beneficiaries when you die. Taxable assets can include real estate, stocks, money in a bank account, and other valuable belongings. It does not look like the estate tax will permanently go away. However, with careful planning, you can reduce taxes substantially.

Americans have been planning their estates in accordance with the Economic Growth and Tax Relief Act since 2001. This Act is important because it changed 441 tax laws and was the biggest estate tax reduction in 20 years. Here is an overview of what the Act covers:

Lower Tax Rate

The Act lowers the tax rate on the following taxes:

1. The marginal estate tax; the tax levied on your estate when you die. Note: This tax can be a burden on heirs if you die and leave behind assets for them, but no monetary funds to cover the tax on that asset. For example, if you leave behind a home, the government might tax up to 55% of its value. Your heirs will have to find a way to pay those taxes if he or she wants to keep it. The Act’s lower tax rate helps to decrease the amount of taxes on assets such as your home so that your heirs are not overburdened, or forced to quickly sell the asset at a low price so funds to pay taxes are available.

2. The generation skipping transfer tax (GST); the tax break given to you if you are transferring assets to a grandchild or great-grandchild.

3. The gift tax; the tax levied on assets that are given away as gifts before you die.

Increased Asset Transfers

The Act increases the amount of assets that can be transferred at death without the estate or generation-skipping tax.

Temporary Tax Repeal

In the year 2010, the generation skipping tax will be repealed. This repeal means that grandparents can gift portions of their assets directly to their grandchildren and great grandchildren without having to lose a portion of those assets to taxes.

For the year 2010, the estate tax also will be repealed for one year. If you die in the year 2010, you can give your entire estate to your heirs without having to worry about paying any taxes. However, if you die in 2011, only $1 million is eligible to be passed on to your heirs without being taxed.

Because the estate tax will not be permanently repealed within the foreseeable future, it is important that you plan your estate so that your desires can be carried out in the most efficient manner, regardless of the year of your death.

Understanding the complicated tax system can be a challenge for someone not versed in tax law. If you are planning your estate protection and distribution, we recommend meeting with an attorney. Your attorney can walk you through the steps needed to ensure that your heirs receive as much of your assets as possible.

Thomas McNally is the staff writer at the National Directory of Estate Planning, Probate & Elder Law Attorneys. McNally stresses the importance of finding a qualified estate planning attorney to ensure that your estate passes to whom you want, when you want, and is carried out in the manner you’ve chosen.

Trust Deeds - Breath A Debt Free Life at Easy Terms

Writen by Linda R Davis

Trust deeds are considered as a convenient settlement of debts a debtor is no more able to pay off. The trust deeds are a method used in Scotland for easy clearance of debts. Usually elsewhere for lessening and time bound pay off of debts, debt management program is sought by the debt ridden person. But trust deeds are quite different from any debt management. While in debt management there is complete payment of the debts in a certain period and usually involves a fresh loan, in trust deeds the emphasis is on making an accepted debt clearing plan legally binding to the lenders.

Usually trust deeds are opted for when a debtor has come to worst financial situation where he can no longer pay for the clearing debts. In such a case the debtor usually files for bankruptcy. But trust deeds enables in avoiding bankruptcy. In other words trust deeds are a respectable alternative for bankruptcy.

Under trust deeds, the debtor makes a proposal to his creditors for paying off the debts in an agreed duration. But the preparing of the proposal requires a careful calculation of debtor’s financial position. The proposal is sent to the creditors for their suggestion and on the base of various suggestions if any, the proposal is redrafted and is sent again to creditors. When the proposal is accepted and signed by the creditors, it becomes a trust deed and is legally binding on all creditors.

The advantage of trust deeds is that lenders can not impose any interest rate anymore on the debtor as the main aim of trust deed is to clear the debts and not to take interest. Another big advantage of trust deeds is that for clearing debts a certain duration which usually is of three years is agreed upon and after the duration if the debts are still remaining then rest of the debts are written off. This way actually, the debts are cleared easily and with lesser amount.

Trust deeds allow debtors a free of worry life as far as apprehensions of legal action from creditors are concerned. Creditors can not take a legal action against the debtor after they have signed the proposal. All the queries of creditors are handled by the licensed insolvency practitioner who assisted in forming trust deed. In fact it is necessary that trust deed is drafted with the assistance of licensed insolvency practitioner.

While drafting the proposal, licensed insolvency practitioner makes it sure that the amount of debts mentioned in the proposal is payable for the debtor. To do this, the practitioner ensures that after paying debts, the debtor still has enough amounts left for meeting routine expenses.

Trust deeds are done despite bad credit of the debtor. The borrower is not allowed to borrow money till the duration the debts are cleared. So there are no risks involved. Trust deeds can be rejected only by the creditors who hold 33 percent of total debts. But usually there is no rejection as main aim of creditors is to get back the loaned amount anyhow. Moreover a notice of rejection or objection has to be issued by the creditor within five weeks of getting the proposal. So if no objections are issued by the creditors, trust deed completes its term successfully.

Intestancy: Passing Without Estate Planning - What Happens?

Writen by Ronald Hudkins

If a person passes on without estate planning of any kind, whether that planning is some kind of will or trust, they are said to have died intestate. Intestate law is the law that decides how assets are transferred and creditors satisfied if a person passes on without saying who gets the house, the car or the guarded family apple pie receipe. Intestacy law is a set of fall back provisions or rules that govern where the assets go, so that the state does not have to decide in each individual case what happens. Intestacy laws are like the default settings on computer program; they are there unless you intentionally alter them. Since most people die intestate, state intestacy laws govern how most people’s assets are distributed after their’ passing. Sometimes, even when a person has a valid will, if that will does not cover some portion of their property, then state intestacy laws will be used as gap-fillers or fallback measures so that all assets are covered.

Although state intestacy laws are best seen as a set of state laws that govern what happens to property left by those who did not make a will or trust, they also reflect some of the other needs a state has. First, states seem to make an attempt to ask what the normal person in the deceased place would want done with their assets. This is an important question because the answers given will reflect what state legislators think a “normal” person is and would want. It is easy for the legislature to over look non-traditional relationships, such as non-marital co-inhabitants, lesbian and gay life partners and children born out of wedlock or even stepchildren. This can bring about tremendous animosity among the people you care most about; so the best plan is to get a will or trust to protect those you love if nothing else.

However, your wishes are not the only goal that states keep in mind in drafting intestacy laws. The state may wish to maintain a system where parcels of land are owned by a single person rather than a group of people; because such groups have a tendency to sue each other over property they all have an interest in and this creates problems and expenses for the state itself. In addition, your state may have an avowed policy of attempting to promote “traditional family” relationships and use its power to craft intestacy laws to give assets to family members that the state deems more worthy. Even if you are someone who normally prefers more traditional family relationships, there is no guarantee that the relationships your state decides are traditional and your understanding of the traditional family will be the same.

Finally, you are in the best position to decide who is to have your assets, because you actually know the people involved; to the state the people involved are people who occupy abstract positions in your life, like spouse, child or parent. You are the one who is in the best position to decide who among your heirs should get something (or anything at all) from your estate, because these people play a greater role in your life than merely occupying some abstract position. They are the people you have laughed with, shared meals with, raised and have had raise you, cuddled with and loved. This is by no means to suggest that what people mean to you can only be known through your will or even be known through your will at all. It is rather to suggest that you should decide who gets what asset because you know what those around you value and enjoy. You should decide what happens with your assets, because chances are you earned them and should be the one to decide how they would best be passed on.

About Ronald E. Hudkins; Ronald Hudkins is a retired military enlisted member that was assigned as a staff researcher. He was responsible to compile, write or conduct; reports, studies, statistics, reviews, plans, inspections, lessons and numerous other tasks deemed essential to operational efforts. His actions allowed superior, peer and subordinate commands, their designated leaders and staffs make vital and logical decisions. The ability to identify, analyze and propose solutions is a trait still exercised. For additional asset protection and estate planning needs he suggests his web site: http://www.AssetProtectNow.com.

Reverse Mortgage Supplemental Retirement Financing Strategy

Writen by Jon Hansen

A reverse mortgage is a loan for senior citizens. It is often used to cover medical expenses, and is becoming a common way for retired persons to supplement their existing monthly retirement income.

This is a loan that senior home owners may take against their current home. You don’t need to pay monthly installment in this type of loan. Instead, the lender will pay for you. You will pay the loan back from your equity when you’ve left the home either by selling it or passing away. Your children can keep your home by paying the loan back with interest if they don’t want to sell it.

The concept of reverse mortgage is confusing to many and very often analogous with the conventional mortgage but they are quite different from each other. A conventional mortgage is a falling-debt and rising-equity transaction. But in the case of reverse mortgages, you will be given money by the lender and you will not make payment. So, it will result in a rising-debt and falling-equity model. This is a perfect type of loan for individuals desiring additional income for any number of reasons.

There are some factors you may consider in choosing a reverse mortgage. This type of loan is suited for you if you need regular funds for living, you don’t want to leave your home to your children and your home is your only asset. In order to qualify for the reverse mortgage, you may not need to have a minimum income. Instead, you may not have income at all or may still owe money on conventional loans. The only requirement is that you are a senior citizen and prepared to take this type of loan against your home. The eligible age may differ from one place to another but in general the minimum age is 60. The joint owner must also sign for the loan if the home is jointly owned.

The amount of money you can get from the reverse mortgage will depend on many factors such as your age, value and amount of equity of your home, interest rates and closing cost on local home loans and other costs of the loan. It also may differ from one lender to another.

You can receive the funds from your reverse mortgage in the form of one time payment, a line of credit, a fixed monthly payment for a stipulated time, or a combination of the above. This will also differ from one lender to another. You can obtain your reverse mortgage from both government and private companies. The government loan is limited to a specific purpose like renovation, repairing and paying property taxes while the private loan can be used for any purpose. The private mortgage is more costly than the government loan because they incorporate various features like service taxes, insurance, and closing costs.

Is Estate Planning for Everyone?

Writen by Christopher Cooper

Many people think they don’t need an estate plan. They relate the term to tax planning and feel that their estate is not big enough to bother. They therefore think estate planning has nothing to do with them.

But estate planning is more than a method to avoid or reduce estate taxes. Many young families might be surprised to learn they should think about estate planning now.

Right now there is an effort to abolish or confine estate taxes to only the very wealthy. Of course, Congress changes the tax laws constantly, so there can be no guarantee that this trend will continue.

Be even a normal working class couple with a home, two cars, money in retirement or 401K plans and maybe the start of a college for their children can have a surprisingly large estate. So even if estate taxes don’t apply today, they may in the future.

Estate planning can be used to distribute your taxable estate in such a way that taxes are minimized. There are all sorts of ways to do this and, if you are wealthy enough, your financial planners and attorneys should be working together to do this for you.

For the rest of us, estate planning is less involved with taxes and more with who inherits your estate; who cares for your minor children; how you feel about life support measures; or who will control your affairs if you are unable to.

Your estate is all you possessions - savings, home, car, investments etc. If you have a will, your estate will be distributed according to your wishes. If you don’t, they will be distributed under state intestate laws.

You would have to check the laws in your state, but there could be cases that if you die without a will, your parents would inherit your property, not your wife or your money could go to distant cousins and not to your lifelong companion.

So the first reason for a will is to have your property distributed according to your wishes. If you want to leave your money to the Salvation Army and not your son, this is the way to do it.

Many parents use estate planning to try to rein in their out-of-control children. They may provide for a bequest that starts at an age when the child has hopefully matured, say 35. Or they may make provisions that if their daughter is divorced, no money would pass to the ex-husband.

More commonly, grandparents use estate planning tools to provide for all or part of their grandchildren’s’ college education or choose to bypass their family and leave their money to their favorite charity.

Or a business owner could pass his business to his partners or employees in order to keep the business running.

A common use of estate planning is to name subsequent beneficiaries. For example, your spouse would inherit your art collection on your death and on her death it would go to a museum.

Another reason for estate planning through a will is to appoint guardians for minor children or disabled relatives you are now caring for. If you are leaving a bequest in your will or the proceeds of an insurance policy (which is generally not part of your estate) to a minor or person unable to look after his own affairs, you also need to appoint someone to manage, conserve, invest and dole out this money for the care of the minor or incapacitated person.

If you are ill or facing the prospect of losing your ability to control your own affairs, you can use estate planning techniques like a durable power of attorney, property transfers or adding a trusted friend or relative as joint owner of your property and bank accounts.

You can also provide for a living will, directing how far you want life support measures to go if you are terminally ill.

So estate planning is more than leaving your grandmother’s watch to your daughter.

The proceeds of most life insurance policies and jointly held property with rights of survivorship are not generally part of the probate estate. Many people believe that they can use these devices instead of a will.

However, only the specific property held jointly is transferred to the surviving owner. For example your house would be transferred, but not any of your separately held investments.

Also problems arise if there is concurrent death, e.g an auto accident that kills the husband and wife.

There can also be adverse tax consequences to passing your property this way.

They are so many different situations and methods of estate planning, it is best left in the hands of a professional, in this case an estate lawyer working alone or in conjunction with your financial planner.

Simple wills are not expensive and can be drawn with the help of advice books or computer software programs.

But if you have to go beyond simple, hire the right professionals.

Estate planning is a complex field. If you have more than a house, car and banking account that you want your wife to get on your death, you should consult a qualified estate planning attorney.

Chris Cooper is a retired attorney. Aided by his wife Aileen, who has an MBA in Finance they endeavor to provide personal financial planning advice. For personal finance and debt management articles, visit http://www.credit-yourself.com