Estate Planning: Why? When? How?

No matter at what stage you are in life, you'll want to think about estate planning. Here, we'll help you understand the importance of estate planning as well as provide you with some useful tips to help you get started.

Why do I need an estate plan?
Everyone should have some form of estate planning, regardless of the size of their estate. Why? Because without an estate plan, state laws will determine how your assets will be distributed when you die. This means your relatives and friends could face the burden of expenses (including legal bills and taxes) as well as the complicated process involved in settling an estate—all of which may be prevented with a well-constructed estate plan.

An estate plan will help protect and divide assets such as cash savings, car(s), house(s), investment portfolio(s), retirement plan(s) of life insurance, etc. and can limit the tax liability to those left behind after your death.

When should I develop an estate plan?
Whether you're young or old, it's important that you begin taking the necessary steps to protect your assets as well as the loved ones you'll leave behind when you die. A will and a trust can do just that. A will is a legal document that determines how and to whom your money, property and personal belongings (i.e., assets) will be distributed after your death.

In addition, if you have minor children, a will allows you to name a trusted guardian for your children as well as provide for their financial security—including their education.

You may also want to take into consideration other family members, friends, charities and organizations (such as your high school or college alma mater) as heirs to your assets.

Taking the time to set up a sound estate plan can help your loved ones understand, resolve and prepare for many of the issues that arise when settling an estate.

Five steps to planning
The following are some helpful tips to developing a solid estate plan:

Step 1: Take inventory	Take inventory of your assets and note the value of each asset, such as: - Houses - Retirement account, i.e., 401(k) and IRAs - Personal investment portfolios, i.e., stocks, bonds, mutual funds and other investments - Insurance policies - Cars - Jewelry - Artwork and other valuables - Businesses, if you're a business owner Identify any debts you may have. Subtract the sum of all your debts from the sum of all your assets to determine the total approximate value of your taxable estate. Keep in mind, not all estate taxes fall within the taxable range. For 2008, estates worth more than $2 million are subject to estate taxes (this limit will increase to $3.5 million in 2009). Building a solid estate plan can help minimize potential estate taxes thereby allowing a good portion of the assets in your estate to be passed on to your heirs.
Step 2: Develop a will	A will is a legal document that allows you to control how your assets are divided among your heirs after your death. Without a will, state laws govern how your assets are distributed between creditors and your heirs, and can create unnecessary confusion, stress and difficulties for your loved ones. Also important, if you have minor children, you'll want to make certain that you name a trusted guardian for your children in your will. Additionally, by leaving assets to the named guardian, you can help him/her cover the cost and management of your children's care. Keep in mind, it's imperative that you keep your will up to date to prevent potential legal issues your loved ones could face after your death.
Step 3: Maintain a life insurance policy	In addition to having a will, it's equally as important to have a life insurance policy to help prevent your heirs from enduring the financial burdens that could arise after you die. A life insurance policy can provide financial support to your named beneficiary(s) after your death (as well as cover the cost of medical and funeral expenses) and can also help reduce estate taxes.
Step 4: Consider a trust	Depending on your individual situation, you may want to consider establishing a trust. Certain trusts may help reduce taxes, simplify the inheritance process, and could prevent your heirs from altering or nullifying your will in court. The following are a few examples of trusts that exist: Revocable Trust (also known as a "living trust"). Assets held in a revocable trust are not subject to probate (the legal process for handling your assets when you die) and are passed on directly to your heirs Charitable Remainder Trust. Allows you to pass on your assets to charity(s) you name in the trust Irrevocable Life Insurance Trust. This trust removes the proceeds from your taxable estate and allows you to reduce, or in some cases, eliminate estate taxes, thereby allowing more assets to be distributed to your beneficiaries Be sure to consult your estate attorney who can help you choose and set up a trust that makes sense for your situation.
Step 5: Don't go it alone	Estate planning can be an extremely complicated process, but you don't have to go it alone. Be sure to consult: a tax advisor who can help you determine the potential tax consequence that could arise as a result of your death an estate attorney who can help you develop a will, set up trusts, etc. an investment professional who can help you identify and invest your assets as well as work with your tax advisor and estate attorney through the estate planning process. Furthermore, an investment professional can help you choose suitable investments and insurance products to help you achieve financial security for your beneficiary(s).

Secure your family's financial future with a solid estate plan. Our investment professionals will work one-on-one with you to help you get and stay on the right track.

Find an investment professional at a WaMu financial center near you for a free consultation.

Note: Any discussion of tax issues is not intended or written to be used and cannot be used to avoid taxes and penalties imposed by the Internal Revenue Service.

In addition, WaMu Investments doesn't provide tax or legal advice. Please consult your qualified legal or tax advisor for these types of matters.