Estate planning is an important and everlasting gift you can give your family. And setting up a smooth inheritance isn’t as hard as you might think.”
– Suze Orman
Most people forget that they own an estate until it comes to passing on their legacy. The term ‘estate’ may sound grand or complicated for many people, but it’s something that everyone possesses based on their income, bank balance, investments, and lifestyle.
Irrespective of how grand or ordinary, you can’t take your estate with you when you die. Then why not make the necessary arrangements when you are alive? Ensuring that you pass on your estate and other essential assets to the right person requires thorough planning. Therefore, such important decisions cannot be taken lightly and left for your last time. As a result, many smart estate owners recommend going for estate planning to find a wise living trust and pass on the legacy.
Besides seeing it as a responsibility, an estate owner should see it as a process where you have to pay the legal charges, taxes, etc., for the estate planning procedure. However, it is an optional process, yet it showcases your concern and responsibilities towards your family or the next generation you look forward to.
Before unraveling more about the necessary steps and what to avoid, let’s find out the literal meaning of estate planning.
What Is Estate Planning?
Estate planning is the legal process of preparing the documents that work as legal evidence of passing on your estate, assets, and property to a living trust or trustee. People often prefer to practice this process at the time of someone’s death, but those who understand this legal procedure’s seriousness make prior arrangements.
The complete estate planning concept revolves around the bequest of assets, property to heirs, and the final settlement of property taxes and legal charges. The process requires an estate attorney who understands the estate law and prepares the documents accordingly.
Talking in a layman’s language, it is a pre-planned legal process where an individual holding estate value names it to any other person. The person who gets the estate’s legal authority is referred to as ‘living trust’ or ‘trustee.’ The process requires both parties’ consent to ensure the deal is fair in the eye of the law.
8 Steps to Proper Estate Planning
- Create a will – The process commences with creating a will. It is a traditional legal document containing all the basic yet mandatory details of the deal. Generally, it includes – the name of the estate holder, living trust, and the estate guardian (most probably the next generation of the estate holder). This would require you to hire a professional estate planning lawyer.
- Get the healthcare directives ready – You never know when you meet an unfortunate incident ending up in demise. Don’t wait for the bad times to ruin your family’s financial security. Get a healthcare directive written on a prior basis. This requires collaborating with a practitioner to run a thorough health check-up while studying your health history. Here, you get all your wishes written for health care which can work as a savior for you. Plus, you are supposed to mention a power of attorney for health care which ensures that someone on your behalf has the right to make decisions when you are not there.
- Here, the financial power of attorney you need to decide and mention to whom you give your financial power of attorney. This would include taking over your funds, bank balance, assets, and estate (if mentioned). The attorney’s financial power can be different from the person mentioned in a power of attorney for decision-making aspects.
- Property of children has to be protected – When getting your estate planning documents done, make sure to mention your children’s name to manage the property and funds inherited by the minor children.
- Mention a beneficiary – This is something that you can mention right from the day you started your bank account. Mention a name as the beneficiary for your bank account funds and retirement accounts, if any. This will save you from the hassle of transferring your bank funds to anyone you want. All in all, it saves you from the probate processes.
- Life insurance plan – You must have a life insurance plan but have you decided to whom you will be allotting all your insurance plan funds? This is counted as a significant measure for clearing the estate tax and other financial needs.
- Understand the estate taxes – Consult your tax advisor or estate lawyer to know all the estate taxes’ ins and outs. This can save you from paying additional or unnecessary fees if any. Plus, you will get enough estate tax calculations giving you a fair idea of how much you would need to spend on estate planning.
- Cover the funeral expenses, too – Although it may sound a bit awkward to be preparing yourself for your own funeral, it’s a wise decision to save your family from the financial or emotional struggle. When talking about paying the funeral expenses, people often go for funeral prepayment plans, whereas you can go for a payable on the death account in your regular bank. His requires submitting the funds and getting a funeral cover helping you fulfill your duties towards your family.
Come Out of the Myth
When talking about the estate planning process, people often relate it to a retired people plan. But when you wake up to the insights of estate planning, you will realize anyone can go about making it easier for your family to bear your irrecoverable loss in life.
Having done with all the legal formalities required in estate planning makes you a perfect and responsible family man to rely on. Estate planning is a crucial part of everyone’s life. Therefore, it requires complete peace of mind to be done. Many see it as a precious gift to their next-generation; some treat it as a responsibility.