Answer: Unless your home is a mansion, you probably don’t have to worry about the federal estate tax, which currently affects only estates worth $5 million or more. After 2012, the limit is scheduled to drop to $1 million.

But you still need an estate plan. Most important, you need legal documents that can help others take over for you should you become incapacitated. Powers of attorney for healthcare and finances can allow someone you trust to pay your bills, make medical decisions and otherwise handle your affairs. Spouses typically name each other as their preferred agents, but you also need to name back-ups in case one of you dies or you’re both injured in the same accident, for example.

You also probably need a will to say who gets what when you die, and you may want to consider a living trust if the probate process in your state is particularly lengthy or expensive (as it tends to be in California). You can create all these documents yourself using software products such as Quicken WillMaker or Nolo’s Online Living Trust. If you want a little more guidance — and many people do — you should look for an attorney who specializes in estate planning. A simple will with powers of attorney will cost a few hundred dollars, while a living trust typically costs $2,000 or more.

Answer: Widows and widowers are often advised not to make any big decisions in the first year of their bereavement. Unfortunately, bill collectors aren’t willing to wait that long.

You need to determine your liability for your late husband’s debts. Don’t rely on what collection agents tell you. They may insist you have a legal or moral obligation to pay a bill when you don’t. An experienced probate or bankruptcy attorney can help you sort through the debts to see which ones need to be paid from your husband’s estate, which you may be responsible for and which can go unpaid. Student loan obligations, for example, typically end at death unless you or someone else co-signed the loans.

You also need to make sure you get all the money and property to which you’re entitled. You and your children may qualify for Social Security survivor benefits. (You can find out more at http://www.ssa.gov.) You also may inherit retirement funds and life insurance policies that are protected from creditors. Life insurance policies that name you as a beneficiary, for instance, pass outside your husband’s estate and don’t have to be shared with creditors — again, regardless of what collection agencies may tell you.

Once you’ve sorted out his estate, you can begin rebuilding your financial life for yourself and your children. A fee-only planner can help you get started. You can get referrals from the Garrett Planning Network at http://www.garrettplanningnetwork.com, which represents planners who charge by the hour, or the National Assn. of Personal Financial Advisors at http://www.napfa.org, which represents planners who charge retainer fees or a percentage of assets they manage for you.

But a Facebook fan pointed out that not all debt collection calls are based on a legitimate debt:

After my father died, my mother was contacted by someone falsely claiming he owed a medical bill, offering to process the payment over the phone. She knew it was false [because] she handled the bills, so she told them not to call again.

Survivors also should beware of calls from purported charities, claiming that the deceased promised them a donation of some kind.

When it comes to claims against an estate, you’ll want to see proof that the deceased owed the debt or made any kind of financial promise. Don’t take a caller’s word for it.

Answer: Let’s be clear: You have no assets. Your mother does, and she may plan to give those to you, but those plans could change. She may well need her money for living expenses and long-term care, which could easily eat up that nest egg.

So you need to start saving on your own for retirement. You may think you can’t live on less than you are now, but make no mistake: You’ll be living on significantly less if you don’t save. Your Social Security benefit, if you retire at 66, will be around $1,000 a month.

If you have a workplace retirement plan such as a 401(k), start contributing to that. If you don’t, put money aside in an individual retirement account. If your adjusted gross income is under $27,750, you may qualify for a tax credit that can help you, known as the Retirement Savings Contributions Credit or Savers Credit. (You’ll use Form 8880 to figure the credit; visit http://www.irs.gov for more information.)

Answer: Medicaid planning is a controversial topic, since the federal program is designed to help the indigent, not those trying to preserve assets. That’s why the programs have look-back periods (typically five years, although it’s 30 months in California) to discourage people from transferring assets just to qualify.

But your point is well taken that estate planning and elder-law issues are too complicated for do-it-yourself solutions.

The headline of Rob Clarfeld’s Forbes.com column pretty much says it all.

If you don’t have much money, then a DIY solution such as LegalZoom or WillMaker may be all you can afford. And it’s probably better to have a DIY will than nothing at all, particularly if you have minor children (you need to name a guardian for them). Nolo legal guides such as “Plan Your Estate” can be a good primer to read before you start.

What baffles me, though, are people who insist on doing it themselves even after they’ve accumulated some assets. Estate planning is extraordinarily complicated and can go wrong in so very many ways. Unintentional consequences abound. As Clarfeld puts it:

Most will never know the woeful inadequacies of their self-drafted documents – this knowledge will ultimately reside with their families, often as they incur enormous legal fees on unsuccessful attempts to exact post-mortem modifications.

I used to think the DIY approach was fine—until I took a CFP course on estate planning and realized how immensely complicated this ever-changing area of the law can be. As older relatives have become incapacitated and died, I’ve seen firsthand how badly things can go awry when you don’t get good advice.

What you want is an estate planning attorney who has seen many, many estate plans go into effect. He or she will know the advantages and pitfalls of the various approaches to dividing up your assets, and can let you know what you’re facing so you can make wise decisions while it’s still possible.

There isn’t a bright line where you pass suddenly from “okay to DIY” to “gotta get an attorney.” Here are some cases where professional help is pretty much a slam dunk:

• If you have minor children and any money (retirement funds, life insurance, whatever), then hiring a professional is a good idea, since leaving money to minors can be tricky.

• If you have contentious relatives who may not carry out your wishes or will fight over your estate, and you care about the outcome.

• Your estate may face estate taxes. The amount exempted from estate taxes currently is a whopping $5 million per person, so very few estates have this problem—at the moment.

I’d also vote for professional help if you’re much over 50. Although strokes or disabling illness can happen at any point, they grow more likely as we get older, and you want to have good, sound planning documents in place so that someone can take over your financial affairs and medical decisions.

I can tell you where NOT to go for advice: “free” seminars. These are usually pitches for insurance products or other potentially unsuitable investments. Good, personalized advice costs money, although if you don’t have a multi-million dollar estate, the costs shouldn’t be prohibitive.

A simple will with accompanying documents, such as powers of attorney for health care and finances, typically costs $200 to $500. If you live in a state with high probate costs, such as California, you may want to spring for a living trust, which will run $2,000 and up.

Either way, it’s not too much to invest in your family’s future well-being.

Answer: You misunderstood. An executor can be held personally responsible for mistakes made in settling an estate. But if you follow the procedures laid out by your state’s probate court, you shouldn’t have a problem.

When your mother dies, you’ll be required to make an inventory of her assets (the car) and her debts (the car loan and the credit card balance). Any assets must first be used to pay her creditors, with the order determined by state law. If her car loan is worth less than her car, for example, the car typically would be sold, the car loan paid off and any remaining equity used first to pay the costs of settling her estate and her funeral expenses. If there’s money left over, it would be used to pay as much as possible of the credit card balance (assuming there are no other debts that would take priority, such as federal or state tax debt).

If there isn’t any money left to pay creditors, on the other hand, you simply inform them of that fact and they have to write off the balance as bad debt. You aren’t personally responsible for paying your mother’s debts, unless you cosigned on a loan or are a joint account holder on a credit card.

Where you might run into trouble is if you ignore your state’s laws, sell the car and pocket the difference or distribute it to other heirs. You also run into trouble by paying one creditor ahead of another in violation of state law. Because you can be held personally responsible for mistakes made in settling the estate, it would be smart to get an attorney’s help.

Answer: Every adult who cares about his or her family should have durable powers of attorney for health care and for finances. As you’ve discovered, the lack of these documents can cause huge problems, forcing families to go to court to get authority to make decisions.

Many people assume incorrectly that their spouses can just take over. In reality, without a durable power of attorney a spouse may not have the legal authority to transactions involving real estate, investments and other assets, even if they’re jointly held. If the spouse is also incapacitated or dies first, getting anything done—down to paying the light bill—can become impossible.

Your father’s living trust may have language that allows the successor trustee (the person who would manage his assets after his death) to make decisions regarding the assets in case of your father’s incapacity. But he still needed a durable power of attorney for finances so that someone else had legal authority to make decisions about assets held outside the trust and to pay bills.

Answer: If your estate situation is truly simple, you can draw up the documents you need with Quicken WillMaker software, which is available from the self-help legal publisher Nolo at www.nolo.com. The software costs about $50 and guides you through the process of creating wills and durable powers of attorney (which you need to name someone to make financial and health decisions for you should you become incapacitated).

Nolo also has an online will form, plus a number of books that can help you, including “Plan Your Estate” and “The Busy Family’s Guide to Estate Planning.”

The do-it-yourself approach can work when your situation is straightforward, but you should consider consulting an attorney if your estate ever gets big enough to worry about estate taxes or if complications (such as children or contentious relatives) become a factor.

photo credit: Paula Perez

Something very cool happened recently that made me glad, once again, that I get to do what I do.

A young woman I know through mutual friends asked me if I was the Liz Weston who wrote for MSN. When I said yes, she said my column “Steps you must take when someone dies” was helpful to her and her husband when his mom died six months ago.

She said the column provided the checklist they needed to tackle all the responsibilities they faced in settling the mother-in-law’s estate.

Furthermore, she said, the experience convinced her to talk to her own parents about the arrangements they’d made to deal with incapacity and death. Her parents had tried to talk to her about these issues before, but she’d always brushed them off, fearful of even listening to what they wanted to say.

Rationally, we know that talking about death won’t cause it to occur. But a lot of us hate to think about losing our parents. Still, knowing some details about your parents’ arrangements and finances can help enormously when the time comes that they die or you need to take over for them.

By overcoming her reluctance, my new friend was able to talk with her parents, put their minds at ease and create a binder filled with the information she would need if they became incapacitated or died.

Among the things it can be helpful to know:

1. Have your parents named someone to make medical and financial decisions for them, if they’re unable to do so for themselves? Who have they named, and have they formalized those choices by having powers of attorney drawn up? Having access to those documents can be critical in an emergency, so knowing where they’re kept and which attorney drafted them is important.
2. Have they discussed what kind of measures they want taken if they’re incapacitated? Some people would want every means necessary to be taken to stay alive as long as possible, while others would want to limit heroic measures.
3. Do they have long-term care insurance or a way to pay for nursing home or home care if they need it? Medicare doesn’t cover such costs, and Medicaid pays for nursing home care only for the poor. If your parents don’t have long-term care insurance or substantial savings, you may want to encourage them to meet with an elder law attorney to discuss their alternatives.
4. Do they have a will or living trust? If so, where is it kept?
5. Do they have a plan for distributing valuable and/or sentimental objects? Talking about inheritances can be an explosive topic in many families, but often parents can head off disputes by making it clear in advance who gets what.

For more on this topic, please read:

• Steps you must take when someone dies
• 3 steps to help parents grow old gracefully
• How to look out for parents 3,000 miles away
• When your parents die broke