Estate planning is part of financial planning, it is crucial to have a proper estate planning to leave the legacy to the next generation. The essence of estate planning is to create strategies to preserve, grow and transfer the family wealth to the next generation in a very seamless manner. It is to make sure that the properties, assets, investments, businesses go to the right people after one's life time. To pass on to the legacy to the heirs or to the loved ones, one must document the wishes without any ambiguity.
It is highly recommended that starting estate planning at least 10 years before an expected transition is an ideal way to ensure that the beginning is made. One can have joint holding on either or survivor basis in the financial assets and nominations to ensure that the transfer of asset happens without any issue. Nominees are not the end beneficiaries, and beneficiaries are decided by the legal heir ship or by a WILL.
WILLS have traditionally been the most commonly used tool by which to distribute wealth to future generations. Family Trusts are the other way of protecting the wealth of the family in an entity and giving the benefit to the beneficiaries without loosing the owner ship of the assets. The Key advantages of the Estate planning are:
Avoids Legal Disputes: To make it clear without any ambiguity as to who should be the beneficiary of which asset and it can avoid legal disputes amongst the beneficiaries or family members.
Tax Planning: Estate planning can help to plan taxes and minimize the taxes liabilities. It helps in not losing out the assets to the government or remain unclaimed.
Asset Protection: By creating Family Trust, one can protect the asset from being claimed by creditors or legal claims. The wealth remains with the family and giving only the defined benefits to the beneficiaries.
Legacy maintained: It helps to preserve the legacy as intended, while fulfilling the wishes of the asset holder.
Financial Security for loved ones: Through WILLs, Family Trusts, One can ensure that the loved ones be it spouse, or minor children or elderly parents financial security is taken care.
Creating a right succession plan or estate plan is very important and critical as the part of a good financial planning process.
A comprehensive estate plan includes the following components:
WILL: It is important to define who you would like to inherit your assets from or who you would like to be the guardian of your children or who you would like to become the executor to oversee your entire estate planning process after their death.
POWER OF ATTORNEY: An individual who makes financial decisions on your behalf when you become incapacitated. Your bills are paid, investments are managed, and legal & business decisions are made by them as well.
DIRECTIVES FOR HEALTH CARE: There is only one difference between a healthcare directive and a power of attorney in that here medical decisions are to be made by a healthcare directive, rather than by a power of attorney.
TRUSTS: It is also important to note that they do not only control when and how assets are distributed but also reduce or eliminate estate taxes.
DESIGNATIONS OF BENEFICIARIES: It is possible to find these in retirement accounts and insurance policies. If you are not present, they will decide who receives your benefits in your absence. You need to review your designations at least once a year.