Estate planning is an essential aspect of any long-term investment strategy and overall investment management. Regardless of your level of wealth, it is important to plan for the future while you are still alive and healthy. Don’t wait for a major accident or health problem to happen before getting your affairs in order.
First, it’s important to consider estate planning a vital part of your lifelong financial goals instead of a depressing or morbid exercise. It gives you the ability to make sure that your assets are managed according to your wishes. So where do you start? Here are the basics of estate planning and management.
What is Estate Planning?
Estate planning is defined as the preparing and process of managing an individual’s assets should they become incapacitated or die. This process, typically done with an attorney, includes identifying beneficiaries, heirs, and outlining how you wish to distribute all of your assets. Assets include property, houses, pensions, cars, and even debt.
Estate planning also allows you to determine your legacy. It gives you the ability to build generational wealth, provide for family members, fund education, and donate to charity. Planning your estate is an extremely personal process and will be different for everyone depending on your wishes. First, you’ll need to consider whether you wish to set up a will or trust.
Wills
A will is a legal document that declares how you want your assets to be divided after death. In addition, if you have children who are minors you will be able to name a person as the guardian of your children should something happen to you. Your will should name your trustee or executor who will carry out your wishes by allocating your assets accordingly. The will should also name all of your beneficiaries or all of the individuals or organizations that you want to receive your assets. If you die without creating a will, the state where you live will determine how your assets are divided and it may not be what you would want for your loved ones. That is why it is so important to have a will that clearly outlines what you want your beneficiaries to receive.
The Probate Process
Once you pass away your will is then sent to the probate court in order to begin the probate process. This is the legal process of settling your estate once you pass away. This can be very quick or very long and drawn out depending on the complexity of your estate and if all of the required information is present in the will. During this process, the court will determine if your will is legitimate. This is also when the court will give the person you named as your executor the legal right to carry out your wishes. Probates are also public record which means there is less privacy with this option.
Trusts
Because there are so many different options available for creating a trust, it can be extremely beneficial to meet with certified wealth management professionals in order to learn about your options and to determine how to best manage your estate. Your circumstances and financial goals will determine what type of trust to create.
A trust enables you to pass your assets to your beneficiaries without having to go through the probate process. This results in fewer taxes and can often be a faster process than executing a will. Creating a trust is a great way to ensure that your wealth is protected and to minimize your overall estate taxes. Another advantage of trusts is that they give you privacy and are not for public record.
There are a variety of trusts available today but the key difference whether the trust is irrevocable or revocable. A revocable trust is flexible and allows you to control what happens to your assets while you are still alive. Revocable trusts are also known as living trusts for that reason. Revocable trusts will typically still be taxed with the rest of your estate but may avoid probate.
Irrevocable trusts are less flexible and usually involve your assets being transferred from your estate. This means that once you create this type of trust you will no longer have control over the assets and are not able to make any changes to the terms of the trust. Irrevocable trusts are preferred if your goal is to limit the amount of estates taxes that will ultimately have to be paid.
Estate Planning and Taxes
Taxes are inevitable and should always be considered when planning your estate. Both federal and state taxes will typically be applied to your estate once you pass away. These taxes are taken directly from your assets which means the total amount of assets that your beneficiaries receive could be significantly lowered if not managed properly. There are many strategies that can be used when it comes to planning for estate taxes. It is important to create a comprehensive estate management plan to ensure that your wealth is being
Planning Ahead
It is important to plan ahead to make sure that your estate is properly managed should something happen to you. You want to ensure that your loved ones are provided for even if you are no longer here. Regardless of your financial situation and wealth, it is important to plan for the future.
If you don’t already have an estate plan in place, you could be putting your loved ones at risk should something happen to you unexpectedly. Give yourself peace of mind knowing that your family will be taken care of even when you are no longer here. Estate planning is a necessary component of any long-term financial strategy. Consult with a trusted wealth manager or attorney in order to determine how to begin your estate planning and management.