What Is Estate Planning
Estate planning refers to the preparation of tasks that manage an individual’s financial situation in the event of their incapacitation or death. Estate planning includes the bequest of assets to heirs and the settlement of estate taxes and debts, along with other considerations like the guardianship of minor children and pets. Most estate plans are set up with the help of an attorney who is experienced in estate law. Some of the steps include listing assets and debts, reviewing accounts, and writing a will.
The Estate Planning Process
Estate planning involves determining how an individual’s assets will be preserved, managed, and distributed after death. It also takes into account the management of an individual’s properties and financial obligations; they may have in the event that they become incapacitated. Assets that could make up an estate include houses, vehicles, stocks, art, collectibles, life insurance, pensions, debt, and more.
Contrary to what you might think, this isn’t a tool meant just for the ultra-wealthy. Anyone can and should consider doing an estate plan. There are various reasons why you might begin estate planning, such as preserving family wealth, providing for a surviving spouse and children, funding children’s or grandchildren’s education, and leaving your legacy for a charitable cause.
Writing a Will
A will is a legal document that provides instructions about how an individual’s property and custody of minor children (if any) should be handled after death. The individual expresses their wishes and names a trustee or executor that they trust to fulfill their stated intentions.
The will also indicates whether a trust should be created after death. Depending on the estate owner’s intentions, a trust can go into effect during their lifetime through a living trust or with a testamentary trust after their death.
The authenticity of a will is determined through a legal process known as probate. Probate is the first step taken in administering the estate of a deceased person and distributing assets to the beneficiaries. When an individual dies, the custodian of the will must take the will to the probate court or to the executor named in the will, typically within 10 to 30 days of the death of the individual.
The probate process is a court-supervised procedure in which the authenticity of the will left behind is proved to be valid and accepted as the true last testament of the deceased. The court officially appoints the executor named in the will, which, in turn, gives the executor the legal power to act on behalf of the deceased
Writing a will is one of the most important steps. But there’s so much more to do. Other major estate planning tasks include the following:
- Limiting estate taxes by setting up trust accounts in the names of beneficiaries
- Establishing a guardian for living dependents
- Naming an executor of the estate to oversee the terms of the will
- Creating or updating beneficiaries on plans such as life insurance policies and 401 accounts
- Setting up funeral arrangements
- Setting up a durable power of attorney (POA) to direct other assets and investments.