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.

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: 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

Answer: The person you name to be the guardian of your children does not have to be present when you create your will or other estate-planning documents.

But you better make darn sure that you have the potential guardian’s willing consent.

Taking care of someone else’s children is a huge responsibility, and not one that should be taken, or given, lightly. You’ll want to have a full and frank discussion with this person in advance, including what financial arrangements you’re making to take care of your children should you die while they’re minors.

Even if the person consents, understand that nothing is written in stone. Should you die, the person still could change his or her mind and decline the job. That is one of the reasons why you’ll want to name at least one back-up person in case your first choice can’t or won’t serve.

Also, many attorneys would advise you to name one partner in a couple as primary guardian, rather than both parties. If the couple later splits up or one dies, you don’t want any confusion about who you wanted to take care of your kids.

As difficult as these discussions and choices can be, you should make the effort. If you don’t name a guardian, they could wind up at the center of a bitter court battle, or in foster care. Your kids deserve better.

Guardian angel

There may or may not be a custody battle brewing over Michael Jackson’s kids. (His mother was granted temporary custody of the three, ages 7 to 12, and is seeking to make that permanent.)

But there may be a battle over YOUR kids if you die without a will or other estate document that names a guardian. Even worse: your kids could wind up in foster care.

Sometimes parents put off this necessary chore because the partners can’t agree on a guardian, or simply because they don’t want to deal with the possibility of their own deaths. Get over it. Your children are the ones who will suffer if you don’t get your act together.

Quicken WillMaker costs $40 and will give you the legal documents you need. If your estate is complicated or you have contentious relatives, you may want to invest in the services of an experienced attorney.

But do it now. Don’t leave it to fate, or the courts.

For more, read:

• Who will take your kids if you die?
• 3 legal documents you shouldn’t live without
• 5 big myths about the estate tax