The typical Estate Planning definition is — “the process of determining plans for how an individual’s assets or estate will be preserved, managed, and distributed after your death by setting up trusts or using a will or insurance policies and/or other instruments.
Estate Planning has been around for time immemorial, but it’s becoming increasingly more and more common. Most think that estate planning is for the rich but it is incorrect. There is a myth that only when you are old you should think of estate planning which is not true. Anyone can and should have a proper plan to dispense his/her wealth, possessions, or even liabilities from a younger age.
Estate planning is for everyone to avoid potentially disastrous results for your heirs. It is very important to be aware of why you need estate planning. Here are a few important whys.
- To select who will inherit what among your possessions or properties and valuable.
- Estate planning gives you the power to name your children’s guardians in the event of your untimely death.
- A common estate-planning goal is reducing taxes on what you leave behind.
- Estate planning reduces the chances of family conflicts and unpleasant legal battles.
How does estate planning work?
Estate planning not only determines how your assets or possessions will be distributed after death but also takes into consideration the management of one’s properties and financial commitment if the executor of estate planning becomes incapacitated.
Assets that could constitute an individual’s estate include artwork, cars, debt, houses, life insurance, pensions, and stocks.
The one who is planning to have an estate plan could have many reasons such as providing for a surviving spouse and children, protecting family wealth, financing children’s or grandchildren’s studies, or future or even leaving their legacy behind.
Other important estate planning tasks include the following:
- Setting up trust accounts in the names of beneficiaries and thus Limiting estate taxes.
- Putting a guardian in place for living dependents
- Assigning an executor to oversee the terms of the will.
Writing a will which is a legal document is the most basic step in estate planning. Will provides direction on how an individual’s property should be handled after death. The individual states their wishes and designates a trustee or executor that they trust to fulfill their intentions.
Whether a will is genuine or not is determined through a legal process. When an individual dies, the custodian or a guardian of the will must take the will to a lawyer or executor named in the will within 30 days or the legally allowed duration of the death of the individual.
Then the lawyer takes the will to a court-supervised procedure in which the legality of the will left behind is proved beyond doubt to be valid and accepted as the true last testimony of the recently dead. The next step is for the court to officially engage the executor named in the will, which, in turn, gives the executor the legal power to act on behalf of the deceased.
Is there a difference between ‘estate planning’ and a ‘will’?
Yes, Estate planning is a plan of action that individuals use to figure out what happens to their assets while they’re alive and after they die. Then again a will is a legal document that sketches out how assets are distributed, who takes care of minor children, and any other wishes after an individual’s demise. Hence don’t confuse writing a will with estate planning. Will is just one of the steps you will need to take in the process of estate planning.
Estate planning is a useful way to work out or lay out plans for assets and liabilities before and after you pass away. Without a proper estate plan, your heir or successors could face huge tax charges and the courts will step in to determine how your assets are divided. Therefore, if you want your possessions and your loved ones in safe hands when you are no longer around you must have an estate plan, and with an estate plan, you can be in peace, rest in peace, and also keep your heirs in peace.