Plan For Tomorrow Through Proper Estate Planning Today by Zoe Lawford, Blossom Wealth Management
Every person spends a lot of time and puts in a lot of hard work in order to build a home and provide for their family. The aim is to make sure that loved ones have everything they need to thrive (and not just survive) in this stressful and expensive world, no matter what the future may bring. Estate planning can go a long way towards making this happen.
What is Estate Planning?
Estate planning is an essential financial plan that everyone needs to undertake in order to safeguard their efforts. By means of estate planning, you can create provisions for your family to be well taken care of even when you are not around anymore.
An estate plan passes on the estate to elected beneficiaries, and incorporates all assets including wealth, property, cash and jewelry. It also offers the opportunity to pen down an agenda, a sort of declaration about how you want things done when you can no longer take care of them on your own.
Why is an Estate Plan Necessary?
Life can be exceedingly unpredictable, and more often than not, things don’t turn out the way you intend. Estate planning works as an exception to that rule. It’s a guaranteed fail-safe that comes to the rescue when life takes an unexpected turn!
Most importantly, it ensures financial security for the family in case of an unforeseen event such as the demise of an earning member. It also helps to put an end to unnecessary feuds that have the ability to break a family in existing weak moments, as it ensures that the estate is passed on to elected beneficiaries with utmost care and as per instruction.
Important Questions to Consider for Estate Planning
Estate planning can help put a lot of things into perspective, and answering a few basic questions makes the process of effective estate planning easier. Consider the following questions to make more informed decisions about estate distribution:
- How should the division of assets be carried out as per the number of beneficiaries, and how much should each beneficiary attain?
- Shall the wealth be divided equally or will it be handed down only as per need or favorability?
- Would the estate be passed on directly or through a trust so that it is monitored effectively? What would be the provisions of the trust? Who would be the trustee and how long would the trust hold?
- Will removing assets within the lifetime cause the estate and gift tax bill to reduce in value? Would the reduction in value not compete with the satisfaction of presenting the beneficiaries with their due?
- How will the distributions of valuables such as art, jewelry, etc., be dealt with?
- Will the distribution of the estate be discussed with the beneficiaries for their approval?
- Would contributing to a charity be something of interest?
How to Best Choose the Estate Beneficiaries
When it comes down to the distribution of assets, it’s essential to make an account of everything that will eventually be distributed, from property and wealth to treasured antiques, jewelry and even investments.
- Choosing beneficiaries can be a daunting and time consuming task and needs to be dealt with in a manner that benefits everyone in need and well in advance. It’s important to consider aspects such as who in the family may need financial security the most, who would like to claim specific items that hold emotional value above all else, etc.
- Choosing to distribute everything equally may simply benefit the richer beneficiaries and leave the poorer ones bitter. It is imperative to understand the needs of family members in order to best contribute to the wellbeing in trying times, and avoid unnecessary family feuds too.
- The best way to go about distribution is in collaboration with the entire family, namely the chosen beneficiaries. It’s also important to note that certain intended beneficiaries could react to such discussions in a negative manner, which could be highly emotional and stressful.
- Choosing to discuss such intimate dealings should only be done with stronger and mature members in order to make the best possible decisions. Healthy family relationships are the foundation of a happy family, and estate planning is nothing but a planned way to make sure that loved ones are taken care of no matter what.
Why is Professional Assistance (Financial Planner/Lawyer) Necessary?
The decision regarding the estate and how best to distribute it amongst the chosen beneficiaries for their future financial security, all the while minimizing debt and taxes is an art that only financial planners, wealth management experts and family office advisors can tackle effectively.
- Together with lawyers, they can help put a concrete plan into action, which supports the need for estate planning in a manner that is organized, efficient, ethical and competent. Financial planners can help maximize wealth too, besides helping to avoid escalating debt and taxes.
- Estate planning with professional assistance can provision for incapacitation and reduce the financial pressure on the family, besides assisting in making necessary provisions in terms of guardians for minors, avoiding probate, etc.
- Since after the demise of a person, their estate is meant to be lawfully distributed, professionals can help individuals chart out estate planning instructions that provide for loved ones as per their wishes, and not as per the state’s verdict.
- Professionals can assist individuals with even smaller estate to minimize taxes, in order to leave behind an inheritance, as well as a solid financial plan with well thought out investments in life insurance and other vehicles for retirement.
What are the Various Tools Used in Effective Estate Planning?
In the estate planning process, the first step involves making an account of the dispositions, total net worth, various properties, and basically all the other details of owned assets. This offers a clear picture as to what will be handed down, minus accumulated debt and taxes, and the funds can then be invested for enhancement or simply saved as per liking in order to provide for the family when the time comes.
Besides choosing an experienced financial planner and a trustworthy lawyer to help put the estate plan into place, certain tools are necessary to make it concrete, and these include:
Wills are usually the first tool used to document the desired distribution of assets while naming beneficiaries. A will works as a legal document that details all the assets minus debt and taxes and requires the individual to decide who will look over the execution of the agenda mentioned in it.
The will can also contain all the estate holder’s wishes regarding who will look after minors, etc. It is the most basic tool that becomes necessary on demise, as without one the government gets the privilege of deciding what is to be done with the estate on the demise of an individual, which could mean that the family may receive less than they deserve.
A trust acts as a legal agreement where a nominated trustee holds and supervises proceedings in regards with the assets, acting as a nominal owner for the beneficiaries. A trust is less vulnerable in comparison to wills when it comes to legal challenges. One of the main reasons a trust is formed is to avoid probate, as it lives on even after the demise of the one who formed it.
Besides that, holding an estate in trust