Estate planning to the average person who has never considered it may actually sound like creating plans to build a housing development of some kind. As foolish as this may seem, to the many people who do not wish to think about their untimely death, this naivety is understandable.
Yet death could be just around the corner for anyone, or it may be long in coming and so with this unpredictability in mind, there’s no better reason to plan for it. Estate planning involves drafting out a plan of ownership for where and who your property will go to when you die. This will include houses, cars, valuables, and family heirlooms, literally anything you own that you wish to be passed down to your beloved ones.
Planning can save your family the grief and hassle of having to decide who receives what when you die. At a time when your family will be very upset and distressed, planning can be invaluable to cushioning the emotional trauma experienced and to allow your family to mourn your death in peace. It will also ensure that your most cherished assets go to the people you wish and prevent any unfortunate allocation to people you would feel do not deserve such possessions.
Estate planning can be carried out in several ways:
• A basic will: a legal assertion by which you name a person(s) to be in charge of your properties when you die.
• Making funeral preparations: this is an important issue many people overlook, but having the necessary funeral arrangements in place is one less thing your grieving family has to sort out. Your family may struggle to decide a funeral arrangement they feel you would have liked as well as needing to bear the burden of the additional expense. Funeral arrangements can be costly and so the costs and all the other hassles can be prevented with proper planning.
• Life Insurance: A general life insurance policy involves a lump sum being paid to your family after you die.
Sound estate planning will:
• Help avoid probate
• Minimize the amount by which your property shrinks during the handing over process
• Provide adequate finance to cover the costs of the process
• Minimize the tax costs of the process
• Avoid the burden of passing on any debts to your family
Probate is arguably the most important issue here. So what is Probate?
Probate involves the legal management of your estate by determining which individuals are entitled to your estates assets by interpreting your will. A special court that deals in probate cases analyzes and decides on the validity of the will and then the executor of the estate (chosen by the deceased in their will) arbitrates in the interest of all parties who claim to have ownership over certain or even all parts of the estate.
The probate process can prove very costly in terms of court and attorney expenses. One of the most popular ways of avoiding the probate process is by creating a living trust.
A living trust allows the proper set up of property management where by the owner (grantor) transfers the ownership of their estate to a trust and trustee (which is usually themselves) and at least one other person which is usually the main beneficiary. The main beneficiary and any others on the trust’s records then acquire the rights to receiving the benefits of the estate when the grantor dies and this will almost certainly guarantee the avoidance of the probate process.
A living trust will not however avoid estate and inheritance taxes. Depending on the range and complexity of an owner’s estate, a living trust may or may not be the best solution for estate planning.
There are 4 parties involved in the creation and implementation of the living trust, these are as follows:
• Grantor: As previously mentioned this is the individual who sets up the trust
• Trustee: The individual in charge of managing the trust (can be the grantor)
• Successor Trustee: Upon the death of the grantor, the successor trustee will assume all the powers held by the grantor and will be responsible for carrying out the grantors trust instructions as such.
• Beneficiaries: The individuals who will receive all the benefits from the trust.
There are many other legal avenues to explore within estate planning, will writing and trust creation that go far beyond this article. This article aims solely to give you an understanding of why estate planning and its many factors are so important.
