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: 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’ll need to talk to the executor of your dad’s estate.

Here’s why. When there is an estate tax in place, the assets in people’s estates get “stepped up” to their value at the time of the person’s death. This is a huge boon to the vast majority of estates. Most people’s estates don’t owe estate taxes, but they still get this favorable tax treatment so that no tax is paid on the gains that occurred during the person’s lifetime.

When the estate tax disappeared for 2010, the step-up rules changed as well. Each estate instead is allowed $1.3 million of step-up, which the executor can allocate any way he or she wants, said estate attorney Burton A. Mitchell of Jeffer Mangels Butler & Mitchell in Los Angeles, although no asset can receive a step-up that’s more than its fair market value.

If your father’s estate had less than $1.3 million of unrealized capital gains, then all of your inherited portfolio gets a step-up in tax basis. If the gains exceed that amount, however, some or none of the portfolio would get the step-up, depending on the executor’s decision.

The executor has to file a form with the IRS outlining how the step-up is allocated. This form is due with the decedent’s final income tax return, Mitchell said.

Answer: Creditors typically must be paid before the remainder of an estate can be distributed to any heirs. That’s true even if specific items or dollar amounts are willed to specific people — they get what’s left only after the creditors get their share. If there isn’t enough money in the estate to pay the creditors in full, the executor of the estate is responsible for arranging settlements and the heirs typically get nothing.

Since it sounds as if your brother is also the executor, he would be wise to consult an attorney at this point. Executors can be held personally responsible — and sued — for any mistakes made in settling an estate.

photo credit: bhamsandwich

The answer is: the dead person’s estate. But many family members mourning the loss of a loved one complain they’ve been harassed by aggressive collection agents who often say the mourners have a “moral” or even a legal duty to pay the bills.

The New York Times wrote about these collections, and the Federal Trade Commission has responded with a consumer alert clarifying the issue. An excerpt:

Who is responsible for paying the debts of a relative who has died?
Generally, someone’s estate is responsible for paying their debts. But if there isn’t enough in the estate to cover the debts, they typically go unpaid.

Am I legally obligated to pay the debts of a deceased relative?
You usually don’t have a legal obligation to pay the debts of a deceased relative who was not your spouse. Even a spouse’s obligation to pay may be limited under state probate law. To determine whether you’re legally obligated to pay, talk to an attorney who is knowledgeable about this area of the law.

What should I do if a debt collector contacts me about a debt of a relative who has died?
Give the debt collector the contact information of the decedent’s personal representative. That’s the person responsible for settling their affairs, including paying any outstanding debts from the estate. If there is a will, the personal representative is known as the executor; if there is no will, the personal representative is known as the administrator. Don’t give any of your personal information, like your Social Security number, birth date, or financial account numbers to anyone unless you know who you’re dealing with. Some con artists may check obituaries and other legal notices, and then contact relatives of a deceased posing as debt collectors. These scam artists can use your personal information to help them commit identity theft or other types of fraud.

For more, you can read the FTC’s alert by CLICKING HERE.