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THE SAVAGE TRUTH | Estate planning isn't just for rich people -- get started today

You're taxed when you earn money, taxed when you spend money, and taxed on gains when you invest the money you have left over. And if you're not careful, you'll be taxed again -- when you die!

You may think estate planning is only for the wealthy. Think again. Under current law, the first $2 million of assets in an estate is exempt in 2007-2008. By 2009, that minimum jumps to $3.5 million. The estate tax is scheduled to be abolished completely in 2010. But don't bet your estate on that happening, as Congress struggles to find money.

It's quite likely that the law will sunset in 2011, and the estate tax threshhold will revert to the pre-2001 level of $1 million. When you add up the value of your home, your retirement account, and even your life insurance benefits if you own your own policy, you could easily be paying huge taxes to both state and federal governments, if you die without an appropriate plan.

Estate planning is not all about money. A lot of planning involves making sure that whatever assets you do have are given to the people you want to have them. Titling assets in joint tenancy, or naming beneficiaries for your retirement plans, will not solve all those potential problems.

Here are a few basic documents you should have in place even if you don't have a lot of assets.

• • Revocable Living Trust. In most cases, this document is better than a simple will. It places your assets in a trust you create and manage while you are alive and competent. But when you die, or become incapacitated, the person you name as "successor trustee" can take over your affairs without petitioning the court, and is empowered to distribute your assets according to your directions after your death, without the time-consuming and expensive process of probate. While you are alive, you can buy and sell assets in the trust, reporting the gains or losses on your personal tax return.

Important: Be sure to retitle assets such as your house, investment accounts, and other property in the name of your trust.

• • Pour-over will. This document simply says that any assets you own that are not titled in the name of your trust (perhaps your car, or your daily checking account) are moved into your trust at your death.

• • Irrevocable life insurance trust. Unlike the Living Trust, this trust is used to hold title to your life insurance policies, allowing the proceeds to go to your beneficiaries, without becoming part of your taxable estate.

Important: Have the trust purchase a new policy on your life, assuming you are still insurable. And remember there is a 2-year contestability provision on that new policy. If you transfer an older policy, and die within 2 years, it could be brought back into your estate.

• • Healthcare power of attorney. Name someone you trust to make medical decisions when you are incapacitated.

• • Living will. The "pull the plug" document expresses your wishes about being kept alive in a vegetative state.

Estate planning is not a do-it-yourself proposition. Because state laws vary, and because you won't be around to fix things when mistakes are finally discovered, you need expertise that can't be found in online forms and sample documents. But you can learn enough to save some money on professional legal fees.

Here are a couple of ways to find a qualified estate planning attorney:

www.search-attorneys.com | This is the Web site of the National Director of Estate Planning, Probate, and Elder Law attorneys. You can search by city and state.

www.elderlawanswers.com | While estate planning is definitely not only for older people, this Web site provides excellent information, and a searchable directory of qualified attorneys

Terry Savage is a registered investment adviser. Check out Terry's answers to reader questions at suntimes.com, and click on Business. Distributed by Creators Syndicate.