Estate planning can be very hard to understand. There are several elements that you have to be familiar with to master this kind of planning. This can be in a corporate situation or simply to make sure that your business is successful. But learning about estate planning is not just for the wealthy, it is also something that every responsible professional should have in place. This is so that they can protect their assets, make sure that they are fulfilling their tax obligations and that their future in finances is secure.
Defining Estate Planning
To really understand successful estate planning, we should first understand what exactly it is. Estate planning is organizing and managing all of your assets during your lifetime. This is done so that after you have passed, there are clear instructions of directing and distributing your assets. But it does not only involve your plans after your death, estate planning is also looking into your assets in the present and organizing them to help manage your current financial standing.
Why Estate Planning is Important
Aside from organizing your assets and setting up distribution after you have passed away, there are also many other ways that estate planning is important. Proper planning protects your family members. It helps prevent confusion and disputes after you have died. It is especially important if your assets are significant. This type of legal preparation also helps to reduce taxes. Liabilities for estate tax, gift tax, and even income tax can be minimized with proper estate planning.
Proper Legal Documentation
When starting your estate planning, it is important to first consult with a legal professional. A lawyer can help you out with the guidelines and best practices for estate planning. You can also talk to a financial advisor to help with how to plan your estate properly. Next you have to prepare the necessary documentation for estate planning. These documents include:
- Last will and testament: Your last will and testament is a legally binding document that states how your assets are distributed after you have passed away.
- Power of Attorney: This is another legal document that appoints a specific person to handle all of your asses after you have died.
- Revocable Trust: A revocable trust is made to manage your assets during your life and even after death. This is often preferred because it avoids probate.
- Healthcare Directive: This directive is put in place so that if you are incapable of responding, you have a document that shows your wishes for medical treatment and your preferences for medical care. In most cases, this directive also appoints a healthcare proxy.
Learning about estate planning is more than just handing your final wishes and properly distributing your assets after you are gone. It is about organizing all of your finances and assets ahead of time. It is about making a proactive decision to protect your future. And making sure that the people you care about the most are taken care of. It is not about trust or even mistrust. It’s about being prepared for the worst case scenarios and protecting your finances.
