Estate planning involves writing a will, but it is not a will itself. Estate planning can be precisely defined as a series of legal steps that involve allowing your beneficiaries to stay out of the estate and reduce the taxes incurred.
It also requires you to write a living will naming trusted acquaintances who would acquire power of attorney and executor status in the event of your frailty or death.
Here are some basic facts about estate planning:
o Allows you to exercise direct control over how your property will be treated when you are incapacitated.
o The most important aspects of any estate plan are the procedures followed to prevent too much of the value of the estate from being lost due to taxes such as inheritance tax, estate tax, etc. You can reduce estate tax by naming the recipients of the funds or assets in your estate in your legal will. Also, indicate that a certain amount should be given as a gift. The lifetime tax-free gift threshold is $1 million.
o The inclusion of a living will in the estate plan is also important. Your Durable Power of Attorney (EPA) can only be challenged in court if you fail to implement the Living Will as a legally binding decision.
o In the event that you die without writing a will, the explicit laws of your state will decide how your property will be divided after probate. In such a case, it is quite possible that his estate will be taxed at the probable maximum amount. According to the law, in the absence of a will, your spouse is entitled to receive one third of the value of the inheritance. The rest of the amount must be distributed equally among the children.
o An estate plan allows you to establish terms and conditions regarding the distribution of your property.
o Estate planning provides protection for your assets.
o Estate planning allows for very explicit instructions on how your assets should be treated should you wish to prevent this division of assets from occurring.
To conclude, estate planning is the best method by which your assets can be protected from the vagaries of government taxes and financially irresponsible relatives. It also safeguards your property by preventing the dissolution of your property by the normal laws of succession in the country.