Estate planning- Definitions and What you need to know

Suppose you plan to tick off your estate planning on your bucket list but are still confused about how to go about it. Here’s a guide.

Now, estate planning takes a process. You have to take stock of your assets and also employ the services of experts.

More so, estate planning is not a task you can handle in a day. So, you must begin on time to put things in order. 

Things regarding your will, asset allocation to loved ones, getting a trustee, and other important parts of planning your estate.

In this regard, let us tell you all you need to know about this project in simpler words.

What is estate planning?

Estate planning is the process of taking stock of all your assets and deciding on how to manage and preserve those assets supposed you pass away or become incapacitated.

The process of planning your estate goes beyond all these. 

It also involves financial commitments like estate taxes, employing an attorney, setting up trusts, and including charity.

Again, you have to write your will. A will is a legally documented instruction that carries how you wish to handle your assets after the event of your passing. 

Your will determines what each of your loved ones gets from you.

In it, you will call out everyone and everything you wish for them to have.

Also, you will name someone a trustee to see that they carry out your intentions. 

In continuation, another part of planning your estate involves straightening out your life insurance and other investments you have.

How do you plan your estate?

Estate planning is not only meant for the rich. It is meant for everyone that cares about putting their life and family in order while still alive and functional.

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Now, you can plan your estate by sizing up all your assets. Assets may include savings, cars, houses, land properties, yachts, investments, life insurance, pension, pieces of jewelry, and even your debts.

Different people have different kinds of assets and plan their estate for reasons best known to them.

Furthermore, the major step in estate planning is writing a Will.

Your attorney will guide you throughout this process. Your Will must include how you want to distribute your assets to anyone that matters to you, including a non-family member.

Depending on your family setting, you may have to decide who takes up the role of a guardian for your dependents.

While at it, you also pick out an executor that will see to your will instructions.

If need be, you also have to set up a trust account for your beneficiaries and avenues to give to charity.

Perhaps, you decide to open the trust account while you’re still alive. It is called the living trust. Or a testamentary trust according to your instruction after you pass.

In the event of no beneficiaries, you can appoint an executor on how to disperse your assets to charity.

Steps to planning your estate

The task to plan your estate can be time-consuming without taking the appropriate steps.

For you to focus and get the job done in record time, you need to bring in people in the know of the job.

That is, experts in their fields will come together and make the task a success.

Writing your Will

Writing your will comes in as priority because you need to know all you have and put their distribution in place.

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It will help your beneficiaries to have a smooth allocation without chaos.

Getting an estate planning executor

An executor is someone who is approved by the court of law to oversee estate planning.

First and foremost, they will take stock of all your assets and assess them by their values.

The executor works with you as you write your will. Then, the court will be in tune with your assets and your will writing process.

More so, the executor takes up the duty of paying off debts and taxes from the estate.

They notify the creditors of their payment if any. The creditors must lay claims against the estate at a specific time. Else, the executor rejects the claim.

In this case, a creditor might decide to take up the matter in probate court and let the probate judge handle the issue.

When all debts are settled, the executor, with the court’s permission, will access what is left of the assets and distribute them to the beneficiaries.

Estate taxes

Some of the assets left for your beneficiaries may incur taxes while some do not.

In the event of your passing, your trustee will look for the means to reduce or limit your estate taxes.

One of the ways to get a limit on your estate tax is to make donations to charity.

Your donations cut down on the largeness of your estate and as much as reduce taxes on your estate.

This way, your executor may decide to make different kinds of charitable donations and reduce estate tax more.

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Furthermore, if you have an A-B trust account with your spouse, when you pass away, the trust will help reduce the estate tax.

An A-B trusts is a type of joint trust for the couple that wants to ensure they reduce their estate tax if one person should pass.

Estate freezing is another way that you can reduce your estate tax.

Here, you have the power to lock up the current value of your assets with its tax. A future increase from the estate starts with the new owner who benefited from you.

Role of life insurance in estate planning

Your life insurance can be of help during estate planning. However, this depends on the type of life insurance you run. 

More so, life insurance that has good benefits built up in it can serve as a means of paying off the estate taxes.

On the contrary, everything your beneficiaries gained from your life insurance goes tax-free.

 

In conclusion, planning your estate helps you to allow smooth management and disbursement of your assets.

It does not only have to do with the wealthy. Except you want the court to do a rash duty on your assets. To Plan your estate is simply put as thus; putting your life and all you have together to function smoothly during your lifetime, and in your passing.

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