When you think of an estate, you probably think of a mansion on a large piece of property. Estate planning sounds like it might have something to do with how to buy the mansion, but it actually defines what you want to happen to your assets after your death. While no one wants to think about dying, it's important to have a plan in place to ensure your wishes are followed.

There are several fundamental goals of estate planning:

1. Maintaining control of your assets after you die, instead of the court doing it for you
2. Maintaining control of your assets if you become incapacitated, instead of a family member doing it for you
3. Minimizing the tax liability on your estate, so your heirs inherit as much as possible
4. Avoiding probate, the lengthy and sometimes costly court process of validating your will, to save your heirs time and money, and to keep your personal finances out of public record

If you have children, your primary goal is to provide for them both financially and emotionally by assigning appropriate monetary disbursements and guardianship. Each of the four items listed above includes ways to care for your children.

Examples of how to meet these goals are given below. Since many of the strategies used to meet these goals overlap, it's difficult to break down the information into distinct sections. It's recommended that you discuss your personal circumstances with an attorney or financial professional to ensure that your estate plan is accurate and complete.

Before examining the goals of estate planning, it's important to note that an attorney should review your estate plan. If you're willing to do some of the work on your own, it may not be necessary to see an attorney right away. Estate planning software can save you time and money, and help you get the information you need before seeing an attorney. You may even be able to create legal documents with the software, but make sure your attorney reviews them.

Your estate includes the assets and liabilities remaining after your death, such as:

• Businesses and business assets
• CDs, mutual funds, stocks, and bonds
• Collectibles
• Debts and other liabilities
• Life insurance death benefits paid to your heirs
• Personal property, such as furniture and jewelry
• Real estate
• Retirement plans, such as 401(k)'s and IRA's
• Savings and checking accounts

Be sure to make a complete list, including the value of each. If you don't know the value, consider having the item appraised. If the value isn't known at the time of your death, the IRS will assess the value.

Prepare a Will

The primary aspect of estate planning is preparing a will. A will is a legal document that specifies certain things you want to happen after your death, such as:

• How your assets are to be distributed - i.e., who gets what
• The personal guardian of your children - i.e., who raises them
• The financial guardian of your children - i.e., who oversees how the personal guardian uses your money
• The executor of your estate - i.e., who oversees your wishes are carried out

If you die without a will, also called intestate, the court makes these decisions for you. You probably don't want that to happen, and this is a main reason estate planning is so important.

Dying intestate can be particularly difficult for your children. The court will choose guardians based on state law, not on what you've told your best friend, so it's important to write down your wishes in a will. To be confident that your children are cared for the way you want, you should include the following information in your will:

• Provide written documentation about how you want your children raised - i.e., regarding education, religion, and lifestyle:
  • This is additional information for the personal guardian you have named
• Determine a schedule when money should be dispersed to your child:
  • Since 18 year olds may not be able to handle a large disbursement of funds, you might consider dividing the funds; for example a third at 25, 30, and 35
  • You may want to include a stipulation that funds can be disbursed separate from the schedule for education, home buying, business start up, or emergencies

You may want to consider including the following documents in your will that take effect if you become incapacitated:

• A durable power of attorney:
  • Identifies the person who you appoint to make financial or legal decisions for you
  • It's generally a good idea to make the provisions broad in nature because you may not be able to account for every possibility if you list specific things
• A living will - also called an advance directive:
  • Indicates your wishes about your medical care during a terminal illness or other health crisis, such as being unconscious
  • It typically includes the type of care you want and don't want, such as extreme resuscitation methods

If you want to designate someone other than the person with durable power of attorney to ensure that your living will is carried out, you should document that in a separate health care power of attorney or health care proxy.

A major consideration of estate planning is the estate tax your heirs may have to pay after receiving your inheritance. Using 1999 IRS figures, the estate tax values are as follows:

The $650,000 estate value limitation will increase gradually to $1 million in 2006.

Because the potential tax liability is so high, a goal of your estate plan is to minimize the amount your estate is taxed and allow your heirs to inherit as much as possible. Based on your estimated estate value, you should choose the options that are for you. Examples of ways to minimize estate tax include:

There are three main ways to avoid probate, the court process of validating your will:

It's not enough to just write an estate plan, you should also review it every couple of years. Make sure it's up to date with current laws, and that executors and guardians are correctly chosen. You should also review it after life events, such as:

If you're over the age of 21, you should consider estate planning. Your needs will be different based on such things as:

If you're single and have an estate valued at less than $650,000 (in 1999), you may only need to have a will, a living will, and a durable power of attorney. Regardless of your circumstances, what remains the same is the need to have a specific plan in place.

For information on estate planning that's more specific to your situation, talk with an attorney or financial professional.