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Estate Planning 101: Seven Moves to Make Now


Waiting too long can be a big mistake.

Hiding thousands of dollars inside a book may be a clever way to foil burglars. But it's less than ideal estate planning -- especially when you don't tell anyone what you've done.

Ted Sarenski, a financial planner in Syracuse, N.Y., tells the story of one such literary cache by way of reminding people to not only get organized about estate plans but to not keep them secret from loved ones.

It seems an elderly Pennsylvania man hung on to so many personal items that it took his children a year to go through the clutter after he died. His many books were targeted for charity or the garbage.

Then a book popped off a shelf and money fell out. By the time his kids went through the others, they tallied up about $15,000.

"People do strange things with documents and cash," says Sarenski, who's also an official with the American Institute of Certified Public Accountants. "Give that next generation an idea they might find some hidden treasure, if that's what you're doing."

Sharing your plans is possible only after you make them, of course. Here are some essential priorities to focus on concerning estate planning:

1. Start Your Plan Now

Many people think of an estate plan as something for when you're elderly or on your deathbed. But everyone needs one. An estate plan is a way to manage and protect your assets while you are alive as well, as to conserve and control their distribution after your death.

The end of the year provides an ideal time to finally get into gear on a task that typically languishes on the bottom of to-do lists -- if it's there at all.

"No one really wants to think about estate planning," says Donna Morgan, an estate planning attorney at Mayer Brown in Chicago. "But it's much more pleasant to think about when you're in good health. You can make better decisions and not be so upset by the issues when it all seems so theoretical and academic."

2. Update Your Beneficiaries

Check to see that your beneficiary designations are correct on your company pension plan, life insurance policy, 401(k), IRA or other retirement accounts.

Failing to update them is perhaps the most common error in estate planning. Ex-spouses or parents who are no longer alive remain listed all too often, leaving your money to go where it wasn't intended. Your children or siblings may get what your deceased parents would have. But you probably don't want to have to count on a probate court and state law to decide how it's divvied up.

Putting an extra name on an account is a similar mistake. When an elderly parent puts a child on a bank or mutual fund account for convenience sake, the child can take what's left when the parent dies. Account titling takes precedence over a will or trust so, in this case, siblings might be left without an inheritance.

"These mistakes can cost you and your beneficiaries a lot of money," says Leonard Wright, a San Diego accountant.

3. Name a Guardian

The hardest decision for many couples is naming a guardian for their minor children -- his parents, her parents, a sibling, friends? It's a weighty request to make of any loved one, and not being chosen could cause hurt feelings too. So frequently couples do nothing.

Don't dodge a decision with such important consequences.
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