The Best Definition of Estate Planning & Basics
Here is an interesting fact, the oldest known will is the “Will of Uah,” discovered in an Egyptian tomb. It was written in 2548 BC by Uah, who bequeathed his entire estate to his wife, Teta. Surprisingly even after thousands of years of this incident, the importance of Estate planning often escapes our attention. A survey result says that most Americans presume that Estate planning is necessary, but only 33% have a will or trust.
Often it is advised to have an estate plan for our assets. But what is an estate plan? What purpose does it serve? Well, the answer is simple. It helps you protect all the assets acquired in your lifetime and pass down your properties and financial benefits to your children or surviving family members. Planning for your estate may seem like a rigorous task, but there are a few basic steps to get it done, and they are simple enough.
What Is Estate Planning?
The process of planning who will inherit your assets after your death with the help of legal measures is known as estate planning. Making sure your wealth and other assets pass down to the people you wish is the central estate planning purpose.
It also focuses on reducing taxes so your beneficiaries can keep more of your fortune. However, planning for an estate can also reduce family conflict and offer clear end-of-life instructions should a person become incapacitated.
Planning for an estate starts with listing and summarizing the assets you possess. Typically your estate includes houses, cars, stocks, Pensions, digital assets, life insurance, bank balance, valuable documents, and many more.
People often put off estate planning because they believe they need to possess more assets, are too young, and will have plenty of time to handle it later. But thoughtful planning for your belongings, no matter how valuable or modest.
Upon your demise, without a legally binding estate plan, any property held in your name without a beneficiary designate or other governing agreement will be divided by laws of your state, usually through a court-supervised probate process.
To avoid any ambiguities or misinterpretations about what you desire to become of your assets with a properly drafted plan for them. It will precisely state your wishes to handle your assets after your death.
Now that we have a clear idea of the estate planning definition; let’s understand its basics.
Basics Of Estate Planning
At first glance, estate planning may seem quite complicated due to its many components. Don’t let this deter you, though. Remember that it is best to plan for your assets upon death or disability. You will soon feel in control and much more at ease when you have inquired about estate planning examples and basics.
- Take an inventory of your assets
Estate planning basics start with making a checklist of your acquisitions. Most people don’t make a plan for an estate because they believe they don’t have adequate assets and it is not worth it. But once you start making a list of your tangible assets, it may surprise you.
Your lifelong belongings may include your car, house, other properties, valuable documents, trading cards, antiques, savings accounts, life insurance, stocks, health savings accounts, digital assets, and many more. You should be able to recognize them all before devising an estate plan.
- Specify your Directives
A well-structured estate plan includes essential legal directives. Having clear legal directives leaves no space for ambiguity regarding asset distribution. There are different legal directives, for example, a will, medical care directive, durable financial power of attorney, and many more.
Creating each type of directive comes with its own set of benefits. For instance, a will for your assets will save your family members from going through the arduous process of Probate. When incapacitated, your end-of-life medical choices will be transparent to your family and caregivers if you have a medical directive.
- Beneficiary Designation
You can designate a beneficiary and a contingent beneficiary for many assets, including life insurance policies. You can skip Probate and provide your loved ones a direct payout from the assets. It is vital to designate beneficiaries and keep them updated while laying out an estate plan.
Examine your insurance and retirement savings. Beneficiary designations are typically present in retirement plans and insurance policies, and you should keep track of them and make any necessary updates. Make sure that the right person receives your assets.
- Seek the help of an Estate Planner
What is an estate planner? Estate planners are certified legal professionals with the knowledge and skills to sort out legal processes and documents for the estate planning process. If you have a significant amount of estate in such cases, tax laws and other legal affairs come into play. Estate Planners can help you out with such issues.
Not all require a professional estate planner to help with estate planning. It can sometimes be more economical to do it yourself or use an online service, especially if you have few assets in your name. However, seeking professional help is always advisable as it can minimize any depletion of your wealth and set up legal documents.
Documents Used In Estate Planning
It is better to consider including several crucial legal documents in your estate plan. Let’s examine different estate planning documents to comprehend how one differs from the other and why it is necessary.
- A Will
You designate who you wish to inherit specific possessions and assets in your will. A Will covers your material assets, such as your home and personal belongings, and your intangible assets, such as your bank and investment accounts.
The person you designate as the recipient of your assets is called a Beneficiary. You name an executor in your Will. The executor carries out your will’s provisions as you intend. In your will document, you can also name a guardian for your minor children.
- Revocable Living Trust
A living trust is a legal document made when you are still alive that enables the transfer of assets to a trust for the sake of your beneficiaries without any probate court procedures. People and families with sizable, complicated estates and numerous beneficiaries often use a living will for their estate planning.
A revocable living trust requires more upkeep than a Will. Although if you transfer assets into the living trust, you retain ownership and management of the assets while you are still alive. The trustee’s responsibility after your passing is to distribute your assets following your directives.
- Durable Power of Attorney
A durable power of attorney trusts your agent with the authority to act in your place. If your primary agent is unavailable, you can appoint a secondary agent. Without a Durable Power of Attorney, a court may handle your assets on your behalf, which may not be what you would have preferred.
If you become incapacitated, a conventional Power of Attorney terminates. Instead, a DPOA continues to operate even after your demise. In this manner, when you can’t manage things yourself, you can rest easy knowing that someone you can trust is managing things for you.
- Advanced Healthcare Directives
If you become incapacitated and fail to make decisions about your medical care, an advanced healthcare directive allows you to specify your end-of-life medical care decisions. An AHCD document usually consists of a living will and a medical power of attorney.
Everyone should create an Advance Directive, which includes a Health Care Proxy, regardless of age. If you cannot make medical decisions when incapacitated, you can choose a proxy to act on your behalf when you become incapacitated. It will also bring peace of mind to your family members and caregivers.
- Financial Power of Attorney
A financial power of attorney gives someone the authority to handle your finances and make legal choices, including real estate, taxation, banking, and business interests. You appoint a person as your “agent” when you execute this document, and you can specify precisely how much authority the agent has over your financial affairs.
- Digital Asset Login and Passwords
On average, a person owns a hundred or even more online accounts. With the increasing use of the internet, we now possess digital assets of emotional and monetary value. It is becoming more apparent that one needs to safeguard their digital assets even after death.
You can list your digital assets and their passwords on paper and include them in your estate planning documents, such as your will. You can even appoint someone as your digital executor who can honor your wishes regarding your digital assets.
What Are The Main Goals Of Estate Planning?
A person can fulfill financial planning goals, such as allocating assets among beneficiaries using estate planning. Preparing for an estate also seeks to protect as much wealth as possible for the intended beneficiaries or legitimate heirs. The following is a summary of estate planning’s goals:
- Each person aspires to distribute their collected money to lawful heirs or beneficiaries. They could be loved ones, friends, or other individuals. Estate planning ensures that a person’s assets are distributed as he intended after death.
- Transfer of the maximum wealth and reducing taxes are one of the most crucial goals of estate planning.
- It can help prevent future disputes among the family members raised due to the distribution of properties. It can also help avoid the expensive and time-consuming legal process of Probate.
- Planning for if you become incapacitated also falls under one of the crucial goals of estate planning. An estate plan can be vital for medical care and asset distribution if you become incapacitated.
How to create Trust for a child?
A person can fulfill financial planning goals, such as allocating assets among beneficiaries using estate planning. Preparing for an estate also seeks to protect as much wealth as possible for the intended beneficiaries or legitimate heirs. The following is a summary of estate planning’s goals:
- Each person aspires to distribute their collected money to lawful heirs or beneficiaries. They could be loved ones, friends, or other individuals. Estate planning ensures that a person’s assets are distributed as he intended after death.
- Transfer of the maximum wealth and reducing taxes are one of the most crucial goals of estate planning.
- It can help prevent future disputes among the family members raised due to the distribution of properties. It can also help avoid the expensive and time-consuming legal process of Probate.
- Planning for if you become incapacitated also falls under one of the crucial goals of estate planning. An estate plan can be vital for medical care and asset distribution if you become incapacitated.
Conclusion
Last but not least, as part of asset distribution, everyone needs an estate planning strategy for their assets. Your mind will be at ease as a result. Estate planning aims to ensure that the right people receive the possessions you have worked so hard to accumulate over your lifetime. It also helps you save a ton of time, effort, and money. Estate planning may seem overwhelming at first, but if you know the estate planning basics, it is simple. It is best to consult legal advisors before planning for your estate.
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Our services, such as Digital Vault and Digital Estate, will help you to protect your digital assets. Join Clocr today to leave behind an unforgettable digital legacy. Join Clocr today!
