What is an estate?
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It is indisputable that no one can live forever.
Estate planning ensures that your financial affairs are in order when that time actually comes. But what is an estate? An estate is simply the summation of all your assets which may include house properties, vehicles, bank accounts, LIC policies, and any other investment they might own. It also includes rights and patents in their name. In addition, it also takes into account everything they owe, any outstanding debts, loans, mortgages etc. In short, it is a brief summary of all their financial undertakings. Hence, estate planning comprises the distribution of these assets in accordance with the person’s wishes among other things. Thus making an estate plan the most indispensable document for a person.
Why should you have an estate plan?
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The essentiality of estate planning is not limited to a certain demographic.
It is an indispensable decision every person has to make in his/her life, especially seniors. One might not want to acknowledge the fact that they won't be around forever but that doesn't mean they won't have to. An estate plan ensures that all your financial affairs are in order when that time finally comes. Nonexistence of a will would lead to numerous complications and leave behind all sorts of legal disputes for your family to take care of. This might create friction between family members and/or your heirs. Estate planning would ensure that your loved ones get what they truly deserve and in a manner you would wish them to receive it. Further, an estate plan is not just limited to the distribution of your assets and/or the payment of your debts, it also provides for a healthcare proxy. A healthcare power of attorney document becomes more important as you age. The elderly can’t ignore certain circumstances that might render them incommunicable. Alzheimer's, dementia, paralysis etc. are not uncommon, this document then comes into play as it would help you communicate your wishes through your healthcare proxy. It is important that you trust your healthcare proxy as they will be making all your medical decisions on your behalf during life and death circumstances. Thus, an estate plan would not only take care of your family but also you when you can't take care of either.
How does an estate plan ensure that your wishes are fulfilled?
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There are numerous ways that an estate plan comes into handy.
You have your wills, trusts and other such decisions ensuring documents. The first and foremost step is creating your will. A will guarantees that your estate is distributed to your beneficiaries in accordance with your wishes. Moreover, it gives you the power to choose your executor who would assure that your wishes are carried out with certainty. A traditional will comprises a list of all your beneficiaries, your executor’s name, the assets to be distributed and any debt that need to be paid. Next comes the establishment of a trust. A trust would facilitate the transfer of your assets into holding until your beneficiaries are ready to claim it. There are different kinds of trust that you might indulge in based on your specific needs and individual circumstances. For eg. you could choose a revocable or an irrevocable trust. A special needs trust if you have a loved one with certain special needs, or a spendthrift trust. It is important for you to choose this wisely as this would determine how your assets are being used.The last document to be considered during estate planning would be the letter of instruction. This letter outlines how your death would be communicated, instructions for funeral planning, information on any insurance policies, bank accounts, anatomical gifts etc. It is difficult to think about death in legal terms but it is important to acknowledge the fact that you won't be there to care for your family forever. An estate plan acts as a personal love letter to your family and friends. It expresses the care and love you held and would always hold for them, even though you will not be physically there anymore.
What happens to your debt?
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It is a daunting thought to realize that your debt will live on even after you.
You would want to protect your family from any outstanding debts that they might have to pay. Generally, after your death, your debts are transferred to your estate. Further, your estate enters a court supervised repayment of debt and distribution of assets known as probate. It is a given that you would not want your family to suffer from your debts so to safeguard them from debts, such as a mortgage or school loan, a life insurance policy would come in handy. If you have life insurance and die, your beneficiaries will get the death benefit from the policy. They can put the money toward debt repayment, burial expenditures, or living expenses.
What to do if you don't trust your heirs with your wealth?
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All of us can't be good with handling money.
Especially if you hold highly valuable assets, there exists a possibility of your heirs misusing it. There might be family members suffering from a gambling addiction or a drug addiction who might succumb to it through the availability of large sums of money. It would be practical for you to secure your assets while also securing the future of your heirs. A spendthrift trust allows you to set certain terms and conditions in which your beneficiaries would receive payments. Your trustee would facilitate those transactions and ensure that they are done in accordance with your outlined conditions.
I’ve seen my family/friends go to court for a probate. Can I avoid this?
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Our Trust-based plans help you completely avoid probate.
While a will lets you designate a guardian, decide how your assets get distributed, amongst other things, it will have to pass through the court to be certified as a probate for your assets to actually be distributed.
By creating a living trust, you can accomplish all that a will does, while also avoiding the painful process of probate. Nonetheless, with a will you still have an estate-plan in place.
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