One moment we're enjoying life to the fullest, and the next ... well, accidents do happen. We may not know when we'll shuffle off the mortal coil, but as Fools, we've got to be prepared for the possibility. That means estate planning, wills, trusts, and a whole bunch of other scary and/or depressing-sounding things. They may not be fun to consider, but they're necessary to spare our loved ones needless heartache, and protect them when we're gone.

Where There's a Will...

It's no secret that every adult needs a will. Die without one, and the state decides what happens to your property. Sadly, the state's wishes and your own will rarely coincide. A will lets you divvy up your estate on your own terms, so be a Fool and see an attorney to complete one. It isn't that expensive to prepare, and it ensures that your property will be distributed in accordance with your wishes.

Don't use a preprinted, fill-in-the-blanks form will bought from a stationery shop or created through some of the software programs available for this purpose. These are often out-of-date and may not conform to the laws of your state. Any pennies you save may cost others thousands of dollars after you die.

Do see an attorney. After you complete the will, ensure you review it every five years, at a minimum, to verify its validity and conformance with state law.

What Counts as an Estate Asset?

Basically, everything you own, including the face value of life insurance policies and the current value of all your retirement plans, is a part of your estate. You may pass an estate of unlimited value to your spouse at death with no unfavorable tax consequences. When that spouse dies, though, your children could face heavy taxes on whatever's left.

In 2011 and 2012, you may leave up to $5 million tax-free to heirs who are not your spouse. If you leave those heirs anything above $5 million, the excess will be taxed at a 35% rate. $5 million sounds like a lot, doesn't it? But count the value of your retirement plans, your home, the face value of life insurance you own, and everything else, and that amount is readily reachable by many. Couples must begin to worry about the possibility of estate tax when their combined assets approach this figure. In today's world, with two workers in the family, many estates can and will reach this level. To protect the kids from the IRS, you've got to see a lawyer.

You've Got the Power (of Attorney)

What if you become incapacitated, either mentally or physically? You might want to look into a durable power of attorney granted to someone you trust, such as your spouse or an adult child. You may also want to add a medical power of attorney. Both will allow the person you select to make decisions on your behalf. Without those documents, your family will be forced to hire an attorney, go to court, and have someone appointed as your conservator and/or guardian to make decisions and conduct business on your behalf. That's a needless, time-consuming, and costly process that can be avoided with one or two inexpensive documents that an attorney can prepare today.

Lastly, you may want to execute a living will. It's a silly name for a document that really says you want the right to die a natural death free of all costly, extraordinary efforts to maintain your life, provided that life can only be sustained by artificial means. This document is free in virtually every hospital in the nation. It makes such decisions easier on the doctor, the hospital, and your family. Used in conjunction with a medical power of attorney, this tool can spare your family a painful, drawn-out, and costly process. If you agree with this concept, visit your local hospital, pick up the form, complete it, and let your loved ones know where it can be found.

Estate planning encompasses much more than a will. It may be true that you can't live with lawyers, but you certainly can't die without them. Use their talents to ensure you won't take any fiscal regrets with you to the afterlife. Estate planning isn't fun, but it's definitely necessary.

Now let's take a stab at Step 12: Examining Your Insurance.

• <p> <style type="text/css"> .hpgText .interiorPromo {display:none;} </style> </p> <p> There's something about life insurance that just freaks some people out. For one thing, it forces them to confront the notion of dying. For another, it demands they think about tomorrow when they don't know what to do about today. So instead, they stick their heads in the sand.<br /> <br /> It's not surprising then, that according to the Life and Health Insurance Foundation for Education, 40% of adults in the U.S. have no life insurance.<br /> <br /> Lack of knowledge fuels myths that take on a life of their own. Here are an even dozen myths and truths about life insurance.</p> <br /> <br /> <p> <span class="byline">By <a href="http://www.dailyfinance.com/writers/sheryl-nance-nash/">Sheryl Nance-Nash </a></span></p>
• <p> <style type="text/css"> .hpgText .interiorPromo {display:none;} </style> </p> <p> <strong>Truth:</strong> Having a life insurance policy through work is a great benefit, but it's also temporary coverage. If and when you leave that company, the coverage will end. So it makes sense to explore a life insurance policy that will stay with you no matter where you work, says Greg Blake, executive director of life insurance product management at USAA.<br /> <br /> An employer-paid policy typically offers a coverage amount equal to one's annual salary or a modest flat amount, says Butch Britton, CEO, ING U.S. Insurance <a href="http://www.dailyfinance.com/quote/nyse/ing-groep-nv-adr/ing" target="_blank">(ING)</a>. That may prove insufficient: In addition to medical and funeral bills, your loved ones may need to pay off debts such as a mortgage and provide for other basic financial needs for years to come.<br /> <br /> A good rule of thumb is that you might need 10 to 20 times your annual salary, and group benefits just won't get you there, says Brian Ashe, past chairman of LIFE.<br /> <br /> To figure out how much you need check out <a href="http://www.lifehappens.org/life-insurance-needs-calculator/" target="_blank">online calculators</a> like this one.</p>
• <p> <style type="text/css"> .hpgText .interiorPromo {display:none;} </style> </p> <p> <strong>Truth</strong>: In a study by LIFE and research and consulting firm LIMRA, 85% of participants said they thought coverage was too expensive. Not so, says Byron Udell, CEO of Accuquote.com, which helps people find affordable term insurance.<br /> <br /> &quot;The cost of simple level term insurance has come down by more than 60% in the past 16 years, so the prices today are so low, you can afford all you may ever need,&quot; says Udell.<br /> <br /> In fact, a healthy 40-year-old nonsmoker can buy $500,000 dollars of life insurance coverage, with a premium guaranteed not to change for 20 years, for less than $31 a month (about a dollar a day). &quot;So, forego the $5 coffee and other daily luxury purchases to have the funds to budget for the protection of your family's financial well being,&quot; suggests Udell.</p>
• <p> <style type="text/css"> .hpgText .interiorPromo {display:none;} </style> </p> <p> <strong>Truth: </strong>Many life insurance companies are willing to sell policies to people with a range of common medical problems, says Udell.<br /> <br /> In fact, some carriers even specialize in high-risk classes. Yes, the coverage will probably be more costly than it would be for someone in perfect health, but companies will work with you in order to accommodate your needs. &quot;The key is to be truthful about your health upfront, says Udell.</p>
• <p> <strong>Truth:</strong> Term policies, by definition, last for a certain period of time, so if you die after that period and don't renew your policy, it is not there anymore. The option that give the biggest bang for the buck is a combination of term and universal life, says Pete D'Arruda, founder of Capital Financial Advisory Group.<br /> <br /> Term life insurance often gets more expensive as time goes on. Insurance companies make more money with term policies because most people don't die during the terms they are paying for, says D'Arruda. By contrast, he explains: &quot;Universal life insurance is one investment in life that is guaranteed to pay off, and you always pay the same premium.&quot;<br /> <br /> Term is perfect if one needs coverage for ten years or less, or when one has limited cash to dedicate to insurance. For estate planning, business planning or for longer term needs, one should consider cash value life insurance, says Bill Perryman, founder of Perryman Financial Advisory.<br /> <br /> Know too, that the accumulated value in permanent life insurance grows tax-deferred. In other words, permanent life insurance protects your family in the event of your death, but it's much more than that: It's actually one of the most valuable assets in your financial portfolio, says Michael Ferik, senior vice president of individual life at Guardian Life Insurance, which offers its own take on insurance misconceptions at www.lifeinsurancemyths.com.<br /> <br /> Glenn Stevick, assistant professor of insurance at The American College agrees, &quot;Permanent insurance is not a ripoff.&quot;<br /> <br /> Term insurance is less expensive than permanent insurance only when considering the out-of-pocket premium payments, says Mike Roscoe, senior vice president of innovation and actuary at The Hartford. For a long-term perspective, certain permanent insurance products can be much less expensive than term.</p>
• <p> <style type="text/css"> .hpgText .interiorPromo {display:none;} </style> </p> <p> <strong>Truth: </strong>Even if you're not married and don't have children, you should still consider whether you need life insurance. Others may still depend on you, such as parents, and life insurance can cover expenses such as funeral arrangements and potential debts, explains Blake.</p>
• <p> <style type="text/css"> .hpgText .interiorPromo {display:none;} </style> </p> <p> <strong>Truth:</strong> Lifestyle has a direct impact on life insurance premiums. Typically the healthiest individuals see the lowest premiums, but other factors that affect cost include lifestyle choices like smoking, as well as your occupation and hobbies, says Blake.</p>
• <p> <style type="text/css"> .hpgText .interiorPromo {display:none;} </style> </p> <p> <strong>Truth:</strong> While insurance is a good idea for many people, those who have sizable assets and no debt or dependents may be better off self-insuring, says Frank Darras, a lawyer specializing in insurance.</p>
• <p> <style type="text/css"> .hpgText .interiorPromo {display:none;} </style> </p> <p> <strong>Truth:</strong> The cost of personal life insurance is never deductible if you have an employer, says Darras. If the policyholder is self-employed and the coverage is used to insure the business, then the premiums are deductible on Schedule C of the Form 1040.</p>
• <p> <style type="text/css"> .hpgText .interiorPromo {display:none;} </style> </p> <p> <strong>Truth:</strong> There's more to consider than a salary when it comes to determining how much insurance each spouse needs. Everything from housekeeping to extra-curricular activities would cost a family extra money if a non-employed parent was longer around to contribute.<br /> <br /> &quot;People don't realize is even if you're a stay-at-home mom or dad, you contribute to your family with the valuable services that you provide like cooking, cleaning and driving the kids around town. It all adds up! With more than one life insurance policy in place, your family would be protected if something devastating were to happen.&quot;<br /> <br /> Just as important is the fact that often, the surviving spouse has a loss of income due after their partner's death. Parents often take time off work to be with their young children, which could negatively affect their careers. There is a financial cost, even if the deceased did not have any income.</p>
• <p> <style type="text/css"> .hpgText .interiorPromo {display:none;} </style> </p> <p> <strong>Truth:</strong> You never know when your number will come up. When it does, you probably won't get a telegram warning you in advance, says Udell.<br /> <br /> Life insurance, like all insurance, is the type of product you have to buy before you need it. That means the time to purchase life insurance is when you're young and healthy.<br /> <br /> &quot;If you wait, and you develop a serious medical problem, you may not be able to get the coverage you want. Further, even if you stay healthy, the rate for new life insurance is always based on your age ... even just one year older means higher rates,&quot; says Udell.</p>
• <p> <style type="text/css"> .hpgText .interiorPromo {display:none;} </style> </p> <p> <strong>Truth:</strong> Permanent life insurance policies offer a number of &quot;living benefits,&quot; including the ability to access the policy's cash value through withdrawals or tax-free loans for other needs, such as funding a child's education, a hard earned retirement or other lifelong savings need, says Ferik.</p>
• <p> <style type="text/css"> .hpgText .interiorPromo {display:none;} </style> </p> <p> <strong>Truth:</strong> &quot;You can't buy a policy and then just forget about it,&quot; says Dayle Axman, supervisor of life and health with the Department of Consumer Affairs in Colorado. &quot;Things change. When you got the policy, maybe you had a young family. Twenty years later, your situation is likely very different. Review your policy periodically.&quot;<br /> <br /> Know too, that positive changes in your health can sometimes lower your premiums, and policies with loans and withdrawals should be monitored, points out Ferik.<br /> <br /> &quot;Life happens -- a new family member, an inheritance, a promotion,&quot; says Ferik, &quot;and you need to make sure your policy still fits.&quot;</p>
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