Most people put a lot of effort into providing a comfortable life for their families. The primary advantage of Estate planning is that it enables you to support your family even after passing away. With careful preparation, they will be able to maintain the level of living they currently enjoy.
An estate plan, however, has a few pivotal roles, and understanding them is of the essence. This article guides you through the key roles in an estate plan. Before that, let us delve into the concept of the estate plan.
What is Estate planning?
We amass some sort of assets throughout our lives. Some have a modest amount of possessions, while others have plenty. Either way, you leave all your assets behind upon death. The legal process of transferring, distributing, and gifting your acquisitions to your beneficiaries and next kin with the help of legal sets of documents is known as Estate planning.
Houses, vehicles, stocks, life insurance, real estate properties, art collections, annuities, and loans are examples of assets that can make up a person’s estate. You can plan for your estate for several purposes, including safeguarding family wealth, supporting a surviving spouse and children, or for philanthropic reasons.
What is the main idea of Estate Planning?
Idea of estate planning that makes it unique is safeguarding loved ones in the event of your passing. Estate planning aids a person in deciding how their property will be owned and managed after their passing or disability. It is a simple way to distribute the assets to the family and is tax-efficient.
Planning your estate can give you privacy, security, and control over your legacy. Having a well-developed plan for what happens to your assets can provide you peace of mind that your loved ones will have financial security regardless of your financial situation.
What are some of the common components of an estate plan?
At first, the estate planning procedure may appear overwhelming. There are many factors to consider, and every choice is crucial. Components of an estate planning that are vital are as follows:
Wills and Trusts
So, what to know about wills and trusts? Firstly, whether you are wealthy or have limited assets, a will or trust is essential in any estate plan. Your estate distribution after your passing takes place according to your desires if you have a will or a trust.
This step of the estate planning process covers all financial aspects. What do you currently have? Why do you need this? Do you possess adequate resources to support dependents after your passing? Making a list of all your assets should be the initial step in financial estate planning.
Durable Power of Attorney
You can designate a dependable person in a durable power of attorney to manage your financial and legal affairs if you become temporarily or permanently unable to do so.
What are some key roles involved in Estate Planning?
Deciding who will assist you in managing your responsibilities if you are unable and after your demise is a crucial step in the estate planning process. Roles in estate planning that are crucial are as follows:
A “testator” of a will is a person who has created a Will for their assets. When the testator dies or shortly after, the terms of the Will take effect. A testator must sign a Will after drafting it. To become a testator, a person must be at least 18 years old.
An executor of will is a person appointed by the testator or chosen by the court to manage the estate and carry out the terms of a will. An executor is responsible for asset distribution to the right person abiding by the testator’s wishes.
Executors organize your financial affairs after your death in collaboration with your lawyer and other financial consultants, including completing tax filings, paying debts and bills, and ensuring asset distribution according to your wish. It would be best if you choose an executor who is rational and responsible.
A beneficiary is someone who receives your assets as specified in your Estate planning documents. Including a beneficiary in your Estate planning is an essential step. You ensure that the appropriate person will inherit your possessions with a beneficiary designation.
Frequently, a person names their surviving spouse or adult children as beneficiaries. Additionally, you can choose a secondary beneficiary or state that a specific asset should only go to a particular beneficiary.
Legal guardian for minor children
In your Estate plan, you can also name a legal guardian for your minor children. If you have a child yet to reach legal age will not inherit your properties immediately if you suddenly pass away. In such cases, you can appoint a legal guardian to take care of your child and manage your assets until your child reaches legal age.
Many often wonder, why do I need an estate planning attorney? However, it is essential to appoint an attorney, otherwise known as an agent, in your Estate planning. An agent acts on your behalf when you are unable to do so.
You should select an attorney for both monetary and medical matters in your Estate plan. The financial power of attorney gives your agent the authority to handle your financial affairs. It includes managing your property, paying your bills, and filing your taxes.
When you are incapacitated or unable to communicate with healthcare professionals, the healthcare power of attorney allows your agent to make decisions on your behalf exclusively in those situations.
The person or organization in charge of looking after the funds and assets in your trust is known as a trustee. The trustee’s duties are often defined in the trust agreement and specify how the trustee will carry out your intentions and directives.
Typically a trustee’s duties are to manage assets, pay bills, file tax returns, and distribute your goods to those you have designated in your trust. This role demands picking someone trustworthy and capable of handling the duty.
Why you should get an Estate Plan?
People often believe that an estate plan is only for wealthy people. But the reality is far from it. Everyone with some sort of asset needs to have a solid estate plan. Below are a few of the many reasons why you should have an Estate plan.
Safeguard your family's future
Don’t put your loved ones in limbo. An estate plan will ensure that your family, in the wake of an unexpected death, can support themselves and won’t disintegrate due to abrupt financial strain.
Avoid frictions between family
Family friction is the most common problem due to a lack of an estate plan. When you plan for your belongings, it leaves no space for ambiguity. It also helps avoid family friction when you are gone.
Minimize Estate tax
A sound estate plan can help minimize the tax imposed on them. It also helps your family avoid the expensive and time-consuming process of probate. You want to ensure that your next kin receives the maximum benefit from your assets.
Now that you understand the key roles in estate planning, you can decide better how to choose an estate planning attorney or a beneficiary. Lastly, understanding the fundamental functions of an estate plan will assist you in achieving your estate planning objectives and safeguarding your and your loved ones’ interests. Ensure that the right person is at the receiving end of your hard-earned assets.
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