Estate planning includes making plans to delegate the transferring of your estate after you pass. Your estate is all the assets under your ownership. It may include physical money, clothing, jewelry, vehicles, houses, physical property, retirement, savings and investment accounts, etc. Estate planning typically has several intentions and objectives, which includes:
- Ensuring some, or all of your estate gets transferred to your beneficiaries
- Paying the minimum amount of taxes on the estate
- Appointing guardians for minor children, if there are any
In What Ways Can an Estate Plan Help?
Despite your age, or how big and complex your estate is, an estate plan can achieve the following:
- Determine the members of your family and other loved ones that you want to receive your property after you pass away.
- Guarantees your property will be transferred to those you have designated, quickly and with little legal challenges as possible.
- Establish the types of life-prolonging medical care you want to get if you are unable to make your own wishes known when it comes time.
- Reduce the amount of taxes that will be required to be paid in order for your property to be transferred to others following your passing.
- Avoid the cost and time related to the probate process by using estate planning methods such as living trusts and bank accounts that are “payable on death”.
- Express the type of funeral arrangements you want, and how associated expenses are to be paid.
Understanding Estate Planning
Estate planning is something that needs to be done when an individual is legally capable, meaning that the individual needs to be of sound mind and at the minimum the age of majority for their state (typically 18). It needs to also be done when the estate’s owner is healthy and free from emotional strain. To start an estate plan, contact an attorney that practices in estate planning or a Certified Public Accountant (CPA).
Estate planning involves an extensive review of an individual’s assets, not excluding their intellectual property.
Some essential terms to know for estate planning intentions include:
- Power of Attorney: Power of attorney allows an individual or organization the legal power to manage your affairs when you are unable to do so yourself. The individual or organization you designate is called an “attorney-in-fact” or “agent.”
- Wills: A will is legal documentation that establishes the fate of your assets after your passing. It dictates who acquires your assets and in what amounts.
- Trusts: A trust is an agreement where you’ve entrusted your assets to an individual or an organization. The individual or trustee is taxed with handling your assets on the behalf of the beneficiary and/or beneficiaries.
Why is Estate Planning Important?
If there isn’t a plan in place, your state has one for you, but you most likely won’t like it.
At disability: If you are named on the title of your assets and you cannot carry out business because of mental or physical incapacity, only a court delegate may sign for you. The court, instead of your family, will manage how your assets are used to care for you using a guardianship or conservatorship (dependent on the term used in your state). It may become costly and laborious, it’s publicly open, and it can be hard to end even if you bounce back.
At your death: If you pass away without a deliberate estate plan, your assets will be allotted following the probate laws in your state. In a lot of states, if you’re married and have children, your husband or wife and children will each get a share. Meaning your spouse could receive only a percentage of your estate, which might not be enough to live on. If there are minor children involved, the court will manage their inheritance. If both parents should die (i.e., in a plane crash), the court will delegate a guardian without the knowledge of whom you would’ve chosen.
Given the option—and you do have the option—wouldn’t you want these issues to be managed in private by your family, not by the court system? Wouldn’t you choose to keep control of who gets what and when? And, if you have young children, wouldn’t you want to have an opinion in who will bring them up if you are unable to?
Source:
- “What Is Estate Planning?” EstatePlanning.com – Powered by WealthCounsel, www.estateplanning.com/What-is-Estate-Planning/.
