Estate planning is defined by the Wikipedia as “the process of anticipating and arranging the disposal of an estate.” It aims to eliminate any uncertainties about the will, and maximizes the value of the estate by reducing any taxes associated with it.
When most people hear about this word, they instantly think that this is for the wealthy families whose beneficiaries will raise issues about who will get what portion of the money and properties they have left behind. However, this is a very wrong impression of estate planning. Regardless of how much money you have, it is important that you think about what will happen to any assets you leave behind and who will be receiving the things that you own, after you have passed away.
Life Insurance protects your beneficiaries in providing them a cash payout in the event of your death. The proceeds from this payout can give your estate enough liquid cash that can be used for the following purposes. First, it may be used to maintain the lifestyle that your family has gotten used to, especially if you are the breadwinner of your family. Should you have any existing debts at the time of your death, the lump sum that they will receive will take care of any concerns they may have. They may also receive the payout in guaranteed monthly income. Those who are divorced may also benefit from this. They can provide for their children from a prior marriage with an inheritance, even if they leave their current assets with their spouse. Likewise, settling affairs with your estate also comes with a price, so having life insurance payout will provide liquidity to your assets. You will no longer need to sell any part of your estate such as your home, farmland, artwork, collectibles, and the like.
There are several elements in an estate plan: the will, the assignment of a power of attorney, a medical power of attorney, and a trust.
Starting with a will, think about which property or asset goes to whom in your family. If drafted according to state laws, the will should guarantee that a property is passed on to the beneficiary according to your wishes. You can start by making a list of your assets and liabilities, and reviewing the beneficiaries for any insurance policies you may have purchased. Make sure to also discuss your funeral arrangements with your spouse, and to discuss who should be the proper guardians for your children as well. Lastly, review the current federal tax exemption limits, and discuss with your lawyer ways on how to reduce estate tax on your properties.
Assign somebody with the power of attorney. This means that the person you assign will act on your behalf, in the event of your disability. Giving the power of attorney to that person means that you are giving him the right to transact, enter into financial transactions and make other legal decisions concerning you.
The same is true with the medical power of attorney. You are thereby assigning that person to make important health care decisions, should you reach the point where you are mentally incapable or physically incapable of doing so. Make sure that you choose someone whom you trust very well, as s/he, literally, will have your life in his/her hands.
Above all these, make sure that you have a certified estate-planning lawyer. Ask for advice on how to best to go about your financial status, to secure your family’s future.