Estate Planning - Basics

Estate Planning: High-Level Overview

A common misconception is that only the wealthy or older people need Estate Planning; however, contrary to popular belief, estate plans aren't just for the wealthy or the elderly. The truth is if you fall into any of these categories, you should have an estate plan:

• You’re over the age of 18

• You own a home or any other property

• You want to make your healthcare wishes known

• You have any savings or investments

• You have children or other dependents

Estate planning is a type of agreement where a person decides who will own and manage their assets once the person is deceased or incapacitated. You want to ensure that the assets you have worked extremely hard to accumulate during your lifetime are distributed as per your wishes. A good Estate Plan will transfer the wealth to the next generation in a tax-efficient way. Therefore, everyone must understand the basics.

Why Estate Planning is important

We cannot understate the importance of Estate Planning. Your Estate Plan should reflect your current situation, finances, and personal family circumstances as well as commitments. To ensure that your assets are passed on to your beneficiaries according to your wishes, it is imperative to have an Estate Plan. A detailed Estate Plan will give you confidence for the future of your loved ones and ensure they are taken care of.

It can help you achieve a variety of goals and objectives, including:

• Provide support and financial stability for your family

• Preserve assets for future generations

• Ensure that your assets are distributed as per your wishes

• Minimize taxes and expenses

• Ensure that the individual(s) you choose can make accurate decisions on your behalf in the event of your incapacity

Without an Estate Plan, your family may face the prospect of lengthy legal proceedings and considerable costs before family-owned assets are passed to them.

How to create an Estate Plan in 7 steps:

Step 1: Prepare a list of your assets and liabilities

Step 2: Define your Estate Planning goals

Step 3: Evaluate your objectives based on your current financial situation & discuss with your advisors

Step 4: Develop your strategies

Step 5: Implement your plan

Step 6: Track & monitor your progress

Step 7: Reassess if needed

Essential documents of the Estate Plan

1. Will

2. Power of Attorney for Property

3. Power of Attorney for Personal Care

A Will typically includes:

• An outline of the administrative powers of the executor(s)/liquidator(s) and trustee

• Instructions for managing and distributing your assets

• Possible creation of a testamentary trust(s) for later distribution

• Naming a guardian for your minor children, if applicable

• Wishes regarding the funeral and other items

• Instructions to minimize income taxes, if possible

Power of Attorney for Property

• Power of Attorney (POA) for Property is a legal document [which] transfers the legal rights to a person to manage and access your finances/principal Property should you be mentally incapable of managing your [assets].

• A POA can help ensure that your financial commitments are managed efficiently and keep your best interests in mind; the objective is to handle your daily financial transactions, lifestyle, accounting, and reporting responsibilities.

Power of Attorney for Personal Care

• POA for Personal Care is a document in which you give an appointed individual the power to make decisions concerning your medical care.

• The individual appointed as a POA for Personal Care is allowed to make decisions about your personal care should you become unable to make these decisions yourself.

Personal care can include your health care, medical treatment, diet, housing, clothing, hygiene, and safety. Although the person you give this power to is called your “attorney,” it does not mean that they are your lawyer. Usually, your attorney is your spouse, a relative or a close friend.

Conclusion

There are many parts to completing a thorough Estate Plan; it is imperative to do it correctly and seek professional help, as every situation is unique.

The content of this blog is intended to provide a general guide to the subject matter. Professional advice should be sought about your specific circumstances.

By: Kamal Gawri, CPA, CA