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Preparing your finances for death and disaster
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Estate planning is a complicated topic, mainly because the laws have become extremely complex. For example, over the next five years, tax rates and exemption amounts will change radically. This year you can bequeath $2 million without triggering federal estate tax, and that number goes up to $3.5 million in 2009, then to an unlimited amount the following year. At the same time, estate-tax rates drop incrementally and disappear altogether in 2010. But then in 2011, the exemption amount reverts to $1 million and the tax rates go back up, unless Congress acts between now and then.

Talk over your situation with an estate tax attorney to see what might be appropriate for you.

But wait -- you're not finished yet. While you're at the attorney's office, take care of other important legal documents. What if you're unable to make decisions about your own medical care down the road? A medical power of attorney assigns a designated friend or family member to make these decisions for you. Separately, consider creating a living will that states whether you want medical intervention to keep you alive in the event of a terminal illness. Think Terri Schiavo.
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Finally, you might consider assigning power of attorney to a trusted friend or family member who can manage your finances if one day you are unable to do so yourself. A "springing" power of attorney goes into effect under particular circumstances, such as if you become incapacitated. A "durable" power of attorney goes into effect immediately. If you assign durable power of attorney to someone outside of the family -- a bank, attorney or daily money manager -- you'll have to pay for the service.

What about your folks?
Have you talked to your parents about their plans? If they've been lucky enough to enjoy good health and still do -- fantastic. But what if something happens down the road? It's important to find out what their intentions are, and to inform them of their options if they're not aware of them.

If you make financial organization a priority for yourself, you can use that as a basis to broach the topic with them. Say, "Hey, the road map to my finances is in this box in case you ever need to know. Do you have a road map?" If they haven't created one, maybe you can help them do so.

While you're at it, ask them if they would leave you a legacy that's priceless -- namely an account of their lives and the values that they'd like to pass on. So-called ethical wills have become popular recently as ways for family members to share values, beliefs, opinions and important life events. Ask them to draw one up for you. Or they may be willing to reflect on their lives in a less formal way, by talking to you on tape, perhaps even on camera, so that you can have a keepsake of them that you can pass on to future generations.

Last summer, a survey conducted by the insurance company Allianz revealed that "nonfinancial leave-behinds, like ethics, morality, faith and religion, are 10 times more important to both boomers and elders with children than the financial aspects of a legacy transfer."

While leaving money behind to heirs may be intended as an expression of love, a personal account of one's life story holds immeasurable value for those who are left behind.

If you have a comment or suggestion about this column, write to Boomer Bucks.'s corrections policy -- Posted: Jan. 25, 2006
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