Estate Planning|Definition|Objectives|Benefits|Types of Estate Planning
In my last blog post, I have written on Power of Attorney. Today I have planned to write down on a very interesting and relevant topic which is Estate Planning|Definition|Objectives|Benefits|Types of Estate Planning.
Definition of Estate Planning
Estate Planning means the process of transferring the total assets of an individual among his legal heirs anticipating death or incapacitation.In this way, estate planning arranges to distribute the real and personal assets of an individual among his heirs.Thus, I can say that Estate Planning means making adequate planning in relation to total property i.e. real and personal owned by an individual for distribution through a Trust or Will. Also, you can read What is Will? Features and benefits of a property Will.
Real property means real estate and personal property means other than real estate such as household items, personal belongings, cars, bank accounts and etc.
Most of us don’t give too much importance to estate planning either due to ignorance or think it to be a complicated one.Interestingly, we like to own assets but not planning for it.This is just simply because we are not financially literate enough. Estate planning is as important as owning or accumulating assets.
Generally, we use will or trust as the way of transferring our wealth.Obviously, there are others ways too such as Power of attorney, Gifts, Succession, Partition.
Objectives of Estate Planning
In broader sense estate planning is a part of Financial Planning.Using estate planning an individual enables himself to meet some of the financial planning like distribution of assets among beneficiaries.Also, estate planning aims to preserve maximum wealth for the intended beneficiaries or legal heirs. The objectives of estate planning can be summarised as follows:-
- Assets transfer among beneficiaries: Every individual wishes to transfer his accumulated wealth among his legal heirs or beneficiaries. They may be family members, friends or other people. Estate planning ensures that this wishes of the individuals go fulfilled either during his lifetime or after his death.
- Lower tax payment: One of the most important objectives of the estate planning is that transfer of maximum wealth and payment of minimum taxes.
- Incapacitation: Estate planning sometimes is resorted to for incapacitation as well. This avoids court controlled guardianship and the sole control remains within the family itself. Also, this reduces the cost of third-party engagement by a court.
- Proper succession plan: Estate planning includes writing a Will as a part of financial planning.This helps in identifying the assets disposal cum succession plan of an individual after his death.
- Who should receive and when: Estate planning helps in preparing a well-designated will to distribute the wealth of the deceased individual among his beneficiaries. Sometimes a will clearly stipulate that a particular family member becomes the owner of any personal effects till his minor child becomes adult or a minor would become the owner of a particular asset when he reaches a particular age.
Benefits of Estate Planning
Some of the benefits of a sound estate planning mentioned below
- Property transfer goes as per the will of the client after his death;
- Taxes and other transfer costs are minimum;
- Client’s family’s finances are well taken care of;
- Sufficient liquidity to pay debts, taxes and other costs at the death of the client;
- Avoidance the process of Probate which may be time-consuming and expensive.
Types of Estate Planning
Estate planning is of two types namely; Lifetime estate planning and After death estate planning.
- Lifetime estate planning: Estate planning done by means of Trust, Power of Attorney, Gift, Partition during an individual’s lifetime;
- After death estate planning: Estate planning that comes into effect by creating a Trust as per individual’s Will after his death. A trust created in this way is called a Testamentary Trust.
Final Word on Estate Planning|Definition|Objectives|Benefits|Types of Estate Planning
Lastly, I would personally suggest that everyone must have an estate planning mechanism in place as a part of financial planning for a peaceful mind and utmost care of his estate after his death. It saves lots of time, efforts, and money as well. Also, I would personally suggest you all to must consult a Financial Advisor for making an adequate estate planning process as a part of financial planning.
So, readers, kindly let me know how do you like this blog post by commenting below. I hope I have done enough justice to this topic Estate Planning|Definition|Objectives|Benefits|Types of Estate Planning.