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Estate Planning

Yes, you have an estate. It's just a fancy way of saying you own stuff that will continue to exist after you die (a house, your baseball card collection, etc). Some of the key items to think about here are:

We'll take them one at a time. Talk to a legal person (lawyer/attorney) for specific advice, I'm just passing on suggestions I've heard elsewhere.

Will

This is the document that you use to direct your asset-giving when you die. You also specify in your will who is to take care of your children when you pass on (this is why when your first child is born you need a will, even if you don't have much in the way of assets). One lesser-known secret is that you don't need a lawyer to draw one up for you. While they'd be happy to take your $100-$300 for a typical will, you can write your own legally, and very easily. Probably the best way is to use software from Nolo press, a do-it-yourself law education group. I really like their software, Willmaker Plus (2008 edition), which does all the work for you. At under $35 (at Amazon.com), it will write your will as well as most of the other legal documents we're about to discuss. Check it out. Once it prints out your will for you (after you answer a few questions), you'll need two disinterested parties (anyone that's not named in the will) to sign the will as witnesses. No notary required.

However, There's a problem with wills. They are administered by a legal system, called probate. Basically, a judge gets your will, considers it, and does what he wants to with all your assets anyway. It may be what you specified, but wills can be contested (challenged), and your wishes may not be carried out. Your disowned child may convince the judge that he really deserves your house, much more than your dear cousin Sally. Also, probate fees can be nasty. Basically, your beneficiaries (the people you want to give stuff to) have to pay all sorts of legal fees (some percentage of your assets, like 5%) to the court before getting control of your assets. In other words, if they can't come up with a quick $20,000 to pay off the system, they can't have your $400,000 house. Also, probate takes time, often 6 months or more, before they gain control of the assets you thought would be so easily left to them.

Living Trust

Also called a "revocable living trust". This exists because of all the imperfections of wills outlined above. It's a way to legally bypass the probate system, with all its attendant nuisances, fees, and time delays. A trust can't be contested the way a will can. The assets transfer into your beneficiaries possession immediately, and they don't have to pay anything for the privilege. While lawyers usually draw these up (and charge $1000+), it is possible to draw up your own trust as well using information from Nolo, but be aware that trusts are a little more complicated, and you don't want anything going wrong. You need to establish the trust, transfer assets to the trust, and a few others things. Definitely a good idea to have a legal advisor for this one. The legal fees may very well be worth it if you're not totally confident about the DIY route. Wills are easy, trusts are tricky. Nolo's software will make one for you, but read the directions carefully, and make sure you transfer assets to the trust after creating it, or it's no good. For the most part, here's a rule of thumb on whether you need a living trust: if your assets are significant, or you feel you have reason to believe your will may be contested, go with a trust. If not, a simple will may suffice.

Health Care Power of Attorney, Living Will

A Health Care Power of Attorney legally authorizes someone to make medical decisions for you when you are unable to do so. While you're at it, you should also make a Living Will, which specifies what your desires are if and when you end up in a vegetative state, Schiavo-style (pull the plug, or no). Good idea to have both. Nolo's Willmaker Plus can make these for you too. Seriously, the software is amazing. Get it, you won't be disappointed. This *is* a web page for DIY investor types, you know. No high-priced hand-holding desired here.