Estate Planning: Why you should not ignore it
The word ‘estate’ in estate planning refers to not just the real estate viz. land and building but all the assets that a person owns. It basically means the net worth of a person at any point in time. So, what comprises your estate? Your estate comprises anything that you own while you are alive and anything that you shall own after your death.
The moment a person starts earning, he/she starts acquiring assets or let us say, starts building up his/her estate. The assets could be anything – money in the bank account, mobile phone, motor vehicle etc. There is a likelihood that one may fail to recognize the importance of digital assets like personal email etc. From estate planning perspective, your digital assets assume lot of significance.
There can be a number of important questions which may need to be addressed; such as – How to keep account of all your assets? Do you really know what all belongs to you? How can you secure your assets from predators and future creditors? How can you keep all your assets under your control? If anything were to happen to you, how can you ensure that your dear ones will be looked after well. If you are alive but incapacitated, how can you ensure that you and your loved ones can survive and not let go of your assets?
Well the list of such questions is long! Given that life is uncertain; a fact that most of the people push under the carpet or fail to recognize or accept, the important question that need to be addressed is – what will happen to your assets when you are dead? If you have minor children, you need to pre-plan for such eventuality for their safety and life? Would you not like your assets to be distributed as per your choice only?
The answer to all such questions lie in Estate Planning. Estate planning has tools that will appropriately address all the above questions/concerns of any individual/family. One of the tools is writing one’s Will.
When should you make a Will?
When it comes to making a Will, generally people think that they are either too young or they are not rich enough. This may compel them to ignore writing a Will. But the best time to make a Will is when one is healthy and in a sane state of mind. And that time is Now!
Why create a Will?
A ‘Will’ contains details on how you want your assets to be distributed. It will help prevent misunderstandings among family members when you are no more. Further, in your Will you:
- Specify an executor who will settle your estate as per your wishes
- Provide direction regarding how debts, taxes, probate fees, and related costs are to be paid
- Provide instructions for covering the living expenses of your family member while your Will is probated (probate is a court process to establish the validity of your Will)
- Specify the assets that are to be placed in a trust for family members or select beneficiaries
How to get your Will prepared?
To ensure legal validity of your will and its effectiveness you should seek services of a professional who is a legal expert and who specializes in estate planning.
Estate planning is a very important tool for you and your family’s’ financial security. In difficult and uncertain times, the importance of estate planning is brought to fore time and again. There can be no better time than Covid-19; to reinforce the importance of estate planning for everyone. Estate planning has solutions for everyone. For business, succession planning is what matters by which the business is transitioned smoothly to the next generation.
Ensuring financial security could look complex for parents of children with special needs. These children require greater financial support; have medical and attendant expense; special education and other such expenses that need to be catered to. While parents of such children may have adequate financial resources but their greatest concern would be – who will take care of their children after their life. Giving your estate to the child through your Will is not the optimal solution because the child is not capable to manage the estate owing to his disability. The other option could be to leave your estate and your child in the care of your relative when you are no more, and with the direction that your estate be used only for the welfare of your child. But is this the most perfect method? There is no guarantee that your relative will stick to your directions and their duty. Also, if anything happens to your relative, be it death or disability, then there could be legal impediments in the way of managing your estate. The best option in this case could be setting up a private trust for the welfare of the child where the trust manages your estate.
Conclusion
While focus on acquiring assets and generating wealth is important; it is also equally important for every individual to ensure that his/her respective inheritance is passed on smoothly to their legal heirs. Estate planning offers solutions that suit the needs of every individual and business families. Emergence of a pandemic in shape of Covid-19, has made people actively think about Estate Planning now. ‘Do It Now’…’Later’ sometimes becomes ‘Never’.
Arnab Wealth Advisors
9th May 2020