Ok, the title can jolt you up a bit, but seriously if you have a lot of assets under your wing then it’s about time you start learning about estate planning, and what it can do for you. Estate planning and asset protection go hand in hand these days, and for a good reason, one of the benefits you get from a successful plan is protection from creditors. But, when you think about it, is protection from creditors all that estate planning can do? Let’s take a look at estate planning, its definition, objectives, roles delegated, shall we?
What is Estate Planning?
Estate planning is a systemized way of planning how your estate is distributed to each of your beneficiaries or heirs. It goes according to your will, and you decide how much your eldest kid or your younger kid gets from your assets. It also takes into consideration the tax, cash flow, timing and risks involved with the transfer. Risks such as competence and vulnerability of your beneficiaries are also taken into account.
Your Estate is defined as the degree, quantity, nature, and extent of interest that you have whether it be in Real or Personal Property. It’s the total amount of property you own which falls under the probate law the moment you die. If you die intestate, then the court will decide on the distribution of your estate in accordance with the Intestacy Act. This is the last thing you want to happen because court proceedings concerning your assets can be lengthy. Your assets can be placed on hold for months because the court can’t decide if your Volkswagen Jetta goes to your eldest son or your youngest child. In a way dying without a will removes you of the right to control your properties, and distribute it the way you seem fit.
Goals of Estate Planning
- Distribute your estate in a fair and equitable way – It’s not a new scenario seeing siblings fighting each other just because of inheritance issues. Brother against brother in a heated courtroom, suing each other just because the other got an apartment near the Marina that both parties have always wanted. Estate planning aims to first distribute your assets fairly among your children so that court battles will no longer ensue once you die.
- Preserve or enhance the value of your assets – An estate plan makes sure that your assets are well managed through an asset management scheme. It allows for your estate to accumulate value as time passes. It also minimizes the leakage of your wealth because of taxes and probate rules. Usually when you die your assets that are not under a trust or joint bank account fall under the category of a probate asset. A probate lawyer then arranges for your estate to be distributed to your beneficiaries after its taxed, and creditors and the bank have been paid. Much of your wealth would then go to other people’s hands instead of your family. An estate plan minimizes the risk of that happening.
- Ensure that your loved ones are financially provided for – The scenario above of the bank and creditors taking your hard earn cash is common for persons dying intestate. This leaves your family feeling not only swindled but also at a great loss. The 2 million dollars that your kids should have inherited entirely ended up become just 500,000 after the bank and your creditors had their share. Protect your family’s future and your hard-earned assets with estate planning.
- Maintains order and harmony among your heirs – A family drama erupts because big brother ends up getting the two million cash deposit inside a joint bank account while his other siblings get just a meager 200,000 each. If you want to prevent your life story from turning into a tv drama that the whole neighborhood is watching, then create an estate plan! Only then can you plainly tell your eldest son that the money in the bank was put in trust to him so he can take care of his siblings. Get the idea lah? Don’t be the community’s Kardashians, plan your wealth succession properly.
Your Estate Planner’s Role
Sure, you can do the planning, but in a situation where money is concerned, who can manage it better an ordinary man or an accountant? If you are getting my point, it’s better to have professional aid when you are dividing your tangible and intangible assets. Professionals can do a better job of property management because they can see potholes and risky investments that you can’t. He will guide you, explain highly technical and multifaceted estate and succession planning processes (that you might not understand), and file the necessary paperwork for you. It’s important to note though, despite your estate planner doing the heavy work, you should still be involved and updated about your assets.
Estate planning allows you to have a smooth flowing succession system that distributes your wealth according to what you will, and not only that it protects your assets and helps it grow even after you’re gone. To sum it all up, estate planning allows you to avoid a tragic and lengthy family feud over your wealth. Want to avoid all the drama and tabloids lah? Get started with your estate planning.