Planning an estate is often confused with drafting a will. In reality, it is way more than that. Estate planning involves allocation of your assets, avoiding probate, minimizing taxes, making decisions about your young children, medical requirements and health care during lifetime and also what happens to your body after death.
Another very important reason to plan your estate is to protect the inheritance of your loved ones at the time of your death. The absence of a plan could let your inheritors make endless rounds of the court, with ultimately the court deciding how your property will be distributed after your demise.
An estate may include a variety of categories including:
- Real estate
- Bank accounts (retirement, investment and savings)
- Life insurance policies
- Personal property (cars, clothes, artifacts, jewelry).
Things to know about estate planning
There are a few pointers one should consider keep in mind while planning an estate. Read on to know what they are:
Making documents – drafting a will
The most significant document, a will has the last word on your property. It clearly states what properties you have, how you want it to be managed and who should receive your assets. Ask for professional help while drafting a will. Also, having an executor is important.
Having a Power of Attorney
A power of attorney allows you to give a trusted person the responsibility to handle your financial and property affairs on your behalf. Also, the concerned person can have the authority to deal with your personal welfare.
Keeping a plan for medical issues
Similar to a living will, an Advanced Directive for Medical Decisions addresses matters related to your health in case you are debilitated. It is only too important to have these papers ready when you are physically fine to avoid serious problems from cropping up later.
Creating a health care power of attorney
Have a health care plan, which permits the person of your choice to make medical decisions on your behalf, in place. First find out if the individual you trust does not have any problem with your wishes and would be willing to carry out the assignment.
Decide your beneficiaries
Having an estate plan lets you decide who you want to leave your property with. You select inheritors who will own your assets after your death, so that your wealth is preserved for later generations. You also have the authority to hand over the Power of Attorney to the individual you deem suitable to execute your last wishes.
Discuss your estate plans with your family
Have a thorough discussion with your children about your estate and its subsequent distribution in order to avoid misunderstandings later. Be sure that beneficiaries you have named on the documents are the ones you want to pass your assets down to.
Reduce your taxes so that inheritors get maximum property
You would not want your wealth to be spent in taxes. One major way of ensuring that is by donating a part of your property to your favorite charity. You can contribute in the form of a gift, money or securities.