06/24/2018










The Basic Tenets of Estate Planning

The term “estate” has some connotations that may make it seem as though estate planning is something only high-income individuals have to consider. However, nearly everyone is an estate owner. To have an estate, you simply need to own something of value that you wish to pass on to someone else. Although you technically do not need an estate plan, as each state has rules to determine how your possessions will be passed on, having an estate plan ensures that your specific desires are fulfilled. Unfortunately, the state default rules, known as the intestacy system, do not depend on what individuals want, but are instead rigid procedures that provide an efficient means for property to be passed on. Thus, estate planning can help you make sure your property is passed on according to your desires, while minimizing taxes and maximizing the amount actually delivered to your intended beneficiaries.

The most basic vehicle for estate planning is the will. Wills can be made fairly quickly and easily and offer a great level of flexibility in disposing of your assets. A will allows you to designate who will be the recipient of property, designate guardians for any minor children, provide donations to charity, and more. You can change a will up until your death, so even if you are uncertain of how you will feel in the future, getting a will sooner rather than later is advantageous. Wills are relatively inexpensive and have few formal requirements, making them a useful, basic tool for estate planning.

Estate planning also commonly makes use of trusts, which transfer property to a trustee you have designated to manage and distribute the assets of the trust according to your wishes. While you can set up trusts during your lifetime, testamentary trusts — those created by will, which are different from ‘inter vivos’ wills set up during your lifetime — help you make sure that your desired asset management strategy is followed even after your passing.

You can set up your trust in many ways in order to provide for your loved ones, a charity, or some other type of organization. A trust may be set up to be primarily an investment tool, with very few distributions, or it may be set up to allow for regular distributions to the beneficiaries you designate. A trust allows you to pass on assets with the peace of mind that all of the assets will be responsibly managed in your absence, even when giving assets to inexperienced investors. In this way, trusts can be useful as gifts that stand the test of time.

While there are other tools and strategies to consider in estate planning, wills and trusts are basic ways to help you achieve the primary goals of estate planning: ensuring your assets are distributed as you desire and avoiding unnecessary taxes, fees, or losses.

SOURCES:
http://www.bankrate.com/finance/personal-finance/the-basics-of-estate-planning-1.aspx



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