What is an Estate Plan
Did you know that nearly everyone has an estate? This is everything that you own such as your car, home, land, checking and savings accounts, investments, life insurance, furniture and all kinds of personal possessions. Your estate can be large or modest, but everyone has stuff that they acquire and own. These are also the things you can not take with you when you depart the earthly plane.
Before anything unusual happens such as an accident or illness, it is good to pre-plan the distribution of assets and belongings. If you want to ensure what happens to your possessions is according to your intentions, you need to instruct the person, the people and organizations that you consider fit for receiving your estate. This is definitely a difficult topic for some, so people write these instructions in a Will that their loved ones read after they die. It is important to clearly mention who you want to receive your assets or portion of assets. Let them know specifically what you want them to receive and when they will receive it. While estate planning, another concern is to pay the least amount in taxes, legal fees and probate court.
Let us know first, what is estate planning and why you need it.
An estate includes all the real and personal belongings of a person excluding his debts. While planning the distribution of an estate, distinguishing between a gross estate, a taxable estate and a probate estate is necessary.
What Is Estate Planning?
Estate planning is usually considered a complicated process but it does not have to be! This is the arrangement for distribution of one's possessions following death. An ideal estate plan assures the assets reach to the determined inheritor while minimizing taxes, expenses and delays.
Some people have misconceptions about estate planning as they believe it as a single document with a standardized format prepared by an attorney. But actually, it is an individualized plan which is based on each person’s unique situation. The whole actual process of developing the estate plan can be done by the individual, but utilizing professional assistance is recommended for faultless planning. Another popular misconception is that only wealthy people can afford to have estate plans. However, this is wrong because the term ‘wealthy’ is relative and confusing. Estate planning includes anyone who owns property. Even if it is a small lot, if you wish to have an inheritor then you may consider setting up an Estate Plan.
Why Is Estate Plan Necessary?
Since the future is unprecedented and death is unanticipated, the individuals who own property should think about the distribution and allocation of their assets as long as they are healthy. They need to consider the following factors:
Who are the intended heirs to receive the property and personal belongings?
Who are the intended people to be guardians for minor children?
Who will be in charge of distributing the property?
Is there a wish to donate to a charity or institution?
Clearly stating the people who they wish to disinherit.
Is there any person who is not intended to inherit the estate?
Considering these factors and preparing decisions on these considerations is the first step to estate planning.
Estate planning is not necessarily expensive :
For a small family or a single adult, the plan incorporates life insurance and powers of attorney for assets and health care resolutions. Then, it can adopt further changes and financial development. A specialist's opinion will help in preparing an estate plan properly by providing critical guidance on the pros and cons of your decisions.
Now is the best time to plan your estate:
We do not usually like to think about our own mortality. We hardly consider the possibility of being unable to make decisions for ourselves. But the moment any uncertainty occurs, the families are found unprepared and baffled. From that viewpoint, the estate plan should be considered as a rescue for the family at that unexpected event. Therefore it is better not to wait, rather start thinking about what is important for you to put in place for yourself and your family.
Estate planning enables to ensure peace of mind:
An estate plan is one of the best gifts you can give yourself and your beloved family members. Having this in place can ensure peace of mind.
It is not mandatory to follow an estate plan. This is why many families have yet to set one up. Many enjoy life to the fullest without considering the future of their eligible successor. But the aftermath of negligence may turn into bitter experiences of your family members. Because when and if you die accidentally, your estate will be distributed using a “one-size-fits-all” plan. According to this, the state legislature also known as ‘law of succession’ will decide to whom, when and where your properties will be distributed. The court is sure to have this process last over many months to years and have multiple fees in the process. When time is of the essence the estate may dwindle and force your family to sell and get what they can out of the process. If you allow this to happen by avoiding the estate planning process, you are actually allowing unknown people to interrupt your assets. There are bitter consequences such as the reduction of the value of your estate because of the associated fees with the legal distribution. Through the processing of attorneys, accountants, appraisers, and other professionals who will benefit, instead of your rightful heirs.
How You can Have an Estate Plan
Every individual's plan is different because the planning is based on the owner's status, requirement, preferences, types of belongings and so on. Yet there are some actions that are to be commonly accomplished while considering all estate plans:
Preparing record of property to determine what you own and what you owe.
Understanding how you own your properties.
Following strategies to avoid probate.
Making a will.
Using trust funds according to your requirement.
Analyzing insurance policies.
Identifying how to minimize taxes and cut expenses related to the estate- distribution.
Identifying professionals and adopting their suggestions while developing an estate plan.
Review and update your plan with additional financial uplift.
Planning for the expenses of your health treatments and burial.
Planning for paying debts.
These actions are required to ensure that your property will be delivered to the people you consider eligible based on your self-made-and-maintained criteria for receiving a portion or the whole of your asset. By completing these actions, you can also set rules for utilizing your assets to fulfill your vision. Finally, an estate plan will ease the administrative complexion placed on your survivors.
Sources: FSFCS56, University of Arkansas Systems