Your estate includes your belongings, such as assets like home, real estate, mutual funds, and bank accounts, amongst other things. It is what you build over a period of time, and acts as a legacy to leave behind. Estate planning is deciding the distribution of your assets in advance and involves defining the use of your possessions after you are gone. Contrary to the myth, estate planning is not only for the rich. It is essential for anybody possessing any assets and helps to simplify the process of distribution of your assets and eliminates the need for expensive probates.
Estate planning is the allotment of your assets to your heirs, thereby protecting their rights and securing their future. Besides, it also allows you to decide the treatment of your estate in case you are incapacitated. A well-planned estate gives you peace of mind and aids in ensuring a comfortable retirement.
Here are a few tips for 2021 for efficient estate planning:
The first step in estate planning is to create a complete list of your assets and liabilities. To begin, take stock of inventories in and around your house and make a list of valuable items. You can also make some notes across each item on how you would like to distribute them. Thereafter, append the details of intangibles like bank accounts and insurance policies, amongst others. Make corresponding notes of the account numbers and the names of the bank and insurance company. In addition to your assets, you must also list down your liabilities. Include the details of your loans and creditors. Also, comment on the corresponding assets attached to each liability. Further, it would be beneficial to mention the repayment mode planned for all of these.
A comprehensive list helps to cover all your assets and liabilities. An early start and a systematic approach can aid in seamless estate planning.
Estate planning is essential irrespective of the amount and value of your assets. Moreover, a lack of estate planning may lead to family disputes. You can legally organize your assets while you are alive by way of a will. It helps to make a will at the earliest and not procrastinate. A will is a documentation of how you would want to distribute your assets. Moreover, you can also name guardians to your dependent children in the will. In the absence of a will, the court can decide on who receives your assets and who receives the custody or responsibility of your kids.
In addition to the above, it is important to name an executor in your will too. The executor takes charge of your assets. This individual looks into the distribution of your property and processes creditor claims, if any. Before finalizing the name of the executor, it may be advised to have a detailed discussion with the individual and comprehend their willingness to take on the responsibility you wish to share with them. An executor is typically a person you can rely on for ensuring a fair settlement in your absence.
Time and effort are the essentials of building an estate. It is important to preserve it for your future generations. Besides, a lack of proper planning may result in an erosion of your estate byway of probate fees. For this purpose, you can set up a trust. A trust typically manages your assets as per your instructions. Further, you can also instruct the trust to manage your expenses in case you are not physically or mentally able to make crucial financial decisions yourself. Setting up a trust aids in ensuring the use of your estate as per your guidelines. It also reduces the probability of your assets being misused.
Life is unpredictable, and you may face medical emergencies when you least expect it. Medical expenses are soaring high and can burn a hole in your pocket. They have the potential of eroding your net worth. However, investing in long term care insurance can help with such medical expenses. These insurance plans usually offer home care services for individuals aged 65 or older who need constant supervision.
It helps you to create your own care system without being dependent on your children or anybody else. Also, since you are prepared for it in advance, you need not use your savings that can be passed on to your dependents later. Thus, your estate remains safe for handing over to the next generation. It helps to invest in the policy sooner to enjoy reasonable premium rates for starting at an early age. As the insurance policy can cover all significant medical expenses, your estate remains secured and intact.
Life insurance offers financial security to your loved ones. It provides support to your spouse and others who are financially dependent on you. It can also be an efficient tool for estate planning. The funds from a life insurance plan can help your family members move on with their lives. Beneficiaries can claim the sum assured by submitting a few documents to the insurer. Your family can use these funds to meet daily expenses and also settle the funeral costs.
Be careful when you pick out the name of your beneficiaries and keep them informed. In addition to this, in case of major life events like marriage, divorce, the demise of your spouse or child, update the beneficiaries’ details on the policy documents. Beneficiaries on an insurance plan supersede the nominee on your will. Hence, it is important to keep the beneficiaries’ details updated and ensure uniformity to avoid family feuds later.
Besides, proceeds received from life insurance are not subject to inheritance tax. This helps in passing on maximum monetary benefits to your family. There are various types of life insurance products available in the market. You may consult your financial advisor to include a suitable plan in your estate portfolio.
Retirement is the best time to explore new avenues and tick off things from your bucket list. It also marks the beginning of a new inning where you can live a life with less hustle and bustle. Creating a retirement corpus takes time. Hence, it is advisable to start early. By starting soon, you let your funds grow and accumulate over time. Retirement also becomes peaceful when you know your assets will be seamlessly passed on to the right beneficiaries. Estate planning can help you hand over your tangible and intangible assets while giving financial protection to your loved ones. Hence, having an estate plan in place can help you lead a stress-free retired life.
You can get in touch with financial advisors in your area if you need assistance in drafting an estate plan.
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