Estate is everything that an individual owns and if one is willing to take care of his/her belongings to be safe and the way they want them to be when they are not around, then estate planning is a must. Irrespective of the wealth that you own, you should plan in such a way that your family won’t face any difficulty if you are not around, alive or after your death. A well-planned estate plan is a must requisite to protect your family’s financial situation while you are alive or dead.
For the preservation of your wealth, the basic of estate planning is a must viz. a will, trust and a power of attorney. Apart from transferring your assets to the beneficiaries as per your desire, an estate plan also strategizes to reduce taxes imposed and the protection of assets from disputes and creditors. Also, estate planning is useful to manage your resources and your own care according to your wishes even if ever you become incapable too.
Benefits of Estate Planning:
1. Wealth preservation: In order to manage your assets during your life or after it, estate planning helps the most. While during your lifetime you will be aware that how your assets are being managed, you will also be relieved that after your death your assets will be the way you want them to be. The assets will be transferred to the beneficiaries and the resources will be managed as decided by you, by the people designated by you only.
2. Refrain from probate after your death: If you haven’t planned ahead of time and you pass away then your family may have to conduct a probate court to get an approval of transferring the assets to the people who inherit them. Probate is usually a time and money-wasting procedure and can be easily avoided by easy methods of estate planning like a will, trust, etc.
If you have a will then the beneficiaries and their share will be like the way you want. Also, the executor will be the one that you have chosen and will be distributing your assets as per your will.
3. Income tax reduction: As we know that taxes do imply a huge impact on your wealth and to avoid it you make various strategies. Hence, tax planning is a must whenever one is talking about either income planning or estate planning.
As we are aware that as on date New York is imposing its own estate tax if you leave assets worth more than $1 million at the time of your death. If you have an estate that owes the tax, then a will can help you with tax planning to avoid estate taxes and the establishment of trusts for the beneficiaries.
Apart from this many people give lifetime gifts to charities, family, educational institute, etc. when they are alive in order to minimize their estate taxes like New York don’t have any gift tax. So lifetime gifting through estate planning too can help in tax reduction.
4. Minor’s or special one’s needs: If you have children or any of your family members is a special one then it is necessarily required that there must be someone to take care of them along with the assets when you are not around. Either the responsibility could be given to a guardian or a trustee could be directed to use the trust’s money for the benefits of the minor or special one.
In the case of a person with a disability, the trustee or the guardian has to provide the services for a lifetime. However, in the case of minor child/children, it could be directed that when the child/children reach a designated age the assets should be distributed to them.
5. Spendthrift Provision: In case the beneficiaries are the young adults or heirs with an improvident habit of spending the heirloom foolishly, it is required to take care that the apart from the fact that the heir is getting the benefits, the resources should be well managed.
In order to avoid this, estate planning can help as one can allot the responsibility to a trust to provide the income to the beneficiary while retaining the principal up to a designated time.
Planning for any physical or mental incapacity: Estate planning is not about planning the management and distribution of your assets while you are alive or after your demise. It’s also about taking care of your own self if ever you become incapacitated. It’s about taking care of your family, medical care, legal debts, finance, and assets when you are unable to make decisions regarding all these.
In such cases, estate planning is a must. Ahead of time, you should have your will, a living will, a durable power of attorney and a healthcare proxy to deal with all the financial and medical issues.