Estate Planning: How Does It Really Work?

Estate planning is vital for everyone. Believe it or not, yes, you do have an estate. The term estate is an all-encompassing term used to refer to all the assets that you will acquire over your lifetime, which will have to be accounted for at the time of your death. Rich or poor, significant assets or small assets, each item matters. This article will allow you to learn more about estate planning, what it is, and how it works.

1. Estate planning involves all the assets over your lifetime.

The common misconception about the term estate is that it is used only to refer to houses and real property. Hence, some people may have been caught saying, “But I do not own any estate.” When talking about estate planning, this is false. Estate planning involves the following assets:

1. Cars and other vehicles such as boats, yachts, jet skis, and the like
2. Jewelry
3. Life insurance policy
4. Houses and other real property
5. Furniture, paintings, and other personal property

Your list of assets that comprise estate planning should include assets both inside and outside of the country. To learn more, click here.

2. Estate planning has worthy enough purposes.

Many of you might think that because you do not have a sizable amount of assets, estate planning is unnecessary. However, this is false. Small or big, estate planning encompasses a wide range of purposes worthy enough to convince you that doing so is a great idea:

1. Ensuring that the people you trust to carry out your decisions upon your incapacitation or absence are the ones to do the same
2. Providing financial stability for your spouse that is left behind
3. Minimizing taxes and other expenses related to the management of assets upon the death of the decedent
4. Preserving your hard-earned assets for your children and future generations
5. Making sure that your assets are bequeathed to the right family members or organizations that you wish to receive the same

3. Estate planning should include everything you want your family members to do, and remember upon your demise.

Estate planning does not only involve the identification of your assets and the distribution of the same, but it includes everything that you would like your family and friends to know and follow, in your absence. It should also include the following, for example:

1. Instructions for your healthcare, in case you become incapacitated to care for yourself before you die
2. Instructions of who is to act as trustee and guardian of your minor children and their properties, should your spouse be absent as well
3. Guidelines for the transfer of your businesses and stocks upon your death
4. Instructions for your life insurance policies

4. Estate planning goes beyond just your will.

It is also a common misconception that the making of your will is already estate planning. In a way, this is true because a will is a part of estate planning, but estate planning does not only involve wills. Apart from a will, the second most important document that you should also prepare is the trust document.

A will is a document that sets out the specific distribution of your assets per your liking. The assets that may be transferred in this will might belong to minors or other incapacitated individuals to sign contracts. Hence, a trust document is essential for this purpose. It is the trust document that also specifies the trustor who holds in trust specific properties for the trustee or the beneficiary, until such time that they can manage the same by themselves.

5. Estate planning is for everyone.

A lot of people might think that they should be concerned about estate planning only later on when they reach the ripe old age of retirement. However, this kind of notion is wrong. For as long as you have started acquiring assets, it is a very prudent act for you to begin estate planning. No one knows what may happen in the future, so it is always good to be prepared.

The good thing about estate planning is that it does not just happen once in your lifetime. After making one, you can revise and update the same to accommodate any other future assets that you may also acquire.

6. Estate planning also has other tools that are easier for you to accomplish.

Estate planning is relatively easy, as there are now many tools that make the same more convenient to accomplish. You do not need so much technical knowledge to learn how to do it, and it can be achieved with the help of a lawyer. For example:

1. An authorized or special power of attorney that is notarized by a lawyer, which states the particular person who has authority to sign on your behalf and to manage your assets upon your incapacity
2. A privacy waiver that authorizes healthcare representatives to have access to your health-related documents, to help manage your healthcare more efficiently
3. A living will that states your medical wishes should you no longer have the ability to communicate the same

Conclusion

No matter how minute or significant your assets may be, you will always want to have the assurance that these will be distributed accordingly when the time comes for you to leave your loved ones behind. It is not uncommon for family members to fight over assets that are left behind, hence it is to your advantage to plan for this accordingly. This act of planning is what comprises estate planning.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.