Estate Planning begins with calculating the value of your assets and liabilities.
These may include securities, real estate, personal belongings, as well as cryptocurrency. Life insurance policies are also part of your estate, even though you could have designated someone else as the beneficiary.
Estate Planning can be complex for people with large estates and many family members. However for most people, simpler plans are sufficient.
All Estate Plans have 3 main objectives:
- To specify how a person wants his estate distributed after his death
- To specify who will care for minors until they reach the age of maturity
- To minimize the amount of tax paid by the estate
WILL
Every adult ought to have a valid will. The will should be updated periodically to reflect changes in your life situation. It is quite affordable to create a will. You can either pay a lawyer a few hundred dollars to draft a will, or prepare it yourself.
Unfortunately, many people die without leaving a will, and sometimes it can have serious consequences. An example is eccentric businessman Howard Hughes who died in 1976 without a will. He left behind an estate valued at nearly US$2 billion (or about $9 billion in today’s money). As he didn’t have a legally-married wife or living children at the time of his death, his estate had to go to distant relatives. About 800 people filed claims, of which many were dismissed, and it took about 11 years to finally settle his estate.
TRUST
A Trust is another effective tool which is often used in Estate Planning.
The purposes of a trust are:
- To manage the finances of a minor, inexperience or otherwise limited person, for a specific period of time
- To limit the way which the beneficiary can use the money left to him or her by the estate
- To provide a tax advantage
- To avoid probate (general administering of a deceased person’s will or the estate of a deceased person without a will)
The trust earns income, pays taxes and distributes benefits to named beneficiaries in accordance with the terms of the trust. The trustee is responsible for managing the trust and overseeing payments. The beneficiaries (who may include the donor) receive the benefits specified in the trust agreement.
SPECIAL NEEDS
You may want to accumulate enough savings to fund special needs such as:
- A wedding gift for each children
- A family member’s overseas education
- A down payment deposit for a condominium
- Other big ticket purchases
Usually you can estimate the time horizon to accumulate the required amount, and then make financial plans to achieve your targets.
Estate planning may require time and careful planning but it is not an impossible task. The difficulties and possible inconveniences you overcome now to plan out your estate would place a lighter burden on your loved ones in the future. Get started early to provide for and leave a legacy for them.
Contact your trusted FLA Organization financial planner for more information today!
