By Winston Dunbar
A healthy, hard working male will work at least for a minimum of 30-35 years over his entire lifetime. During this time, if he earned an average of $1-2 million, then he would have bought several assets during this working life. These assets could be in the form of:
— Personal property
— Life insurance
— Stocks and bonds
These are some of the common fixed and movable assets that people invest in. Apart from this he could also have liquid cash in a savings bank account.
Estate planning involves the accumulation of such assets during a lifetime and the disposal of the same when the person dies. Estate planning involves more than just writing a will and bequeathing the assets to different beneficiaries. It also involves the process of preserving these assets, protecting family members and preparing them for the eventuality of your death. Here are some common things you need to do for estate planning.
Estate planning can commence as soon as a person gets a good job. If he does and starts off earning around $50,000 a year, this could only increase as the years go by. Now, his ‘human life value’ will be calculated based on the number of years he can work and the average salary he will earn during this period. The money thus earned will be an asset and an estate planner will start by ensuring his client will take a good life insurance policy to protect the worker’s family in case he dies prematurely.
There are several tools that can be employed when preparing an estate plan. As already mentioned, life insurance and other forms of investment of liquid cash like stocks and bonds will guarantee there is some estate to be left to one’s heirs. The will is the most complete of estate planning tools. This legal document is written by an individual with the help of a lawyer and with the necessary witnesses. It can make a complete list of all the items a person dies possessed of. He or she can distribute these assets as they see fit.
The assets need not necessarily be given completely to one’s legal heirs like spouse or children. Some assets, especially cash or a special memorabilia can be given to a friend, charitable organization, a faithful helper and so on. The will comes into effect when a person dies and virtually any type of distribution can be accomplished through a will. Of course, if the legal heirs feel the will does not benefit them, they can contest the will in a court of law.
Another estate planning tool is the trust fund that can be set up by a parent for his child. For example, if a father has a lot of money and fixed assets with only a son to inherit, and the son is a reckless wastrel, he can set up a trust fund with certain clauses that will prevent his son from wasting the money. This could be giving him a small allowance every month until he reaches a certain age and becomes a responsible adult.
Estate taxes in most countries are very high. These are usually paid on assets inherited after a person’s death. In order to avoid paying high estate taxes, some people could ‘gift’ (another estate planning tool) a part of their assets during their lifetime to their loved ones. This will reduce the estate sized and automatically reduce estate taxes. So, estate planning involves simply evaluating your financial assets and deciding how and to whom you wish to distribute said assets. There are a few mistakes that one can avoid with estate planning.
Not making plans to distribute your assets could lead to in-fighting among your heirs and in some cases, the government stepping in to distribute the assets in a fair manner. This could involve your heirs only getting a small percentage of your assets with the rest being swallowed up in taxes. So, avoid the common mistake of leaving estate planning for too long. Remember that you need not be wealthy to make estate plans. Estate planning is also protecting yourself and having sufficient for medical bills and funeral expenses. Keep your will up-to-date to take care of changes in family situations like divorce and death of family members mentioned in the will. Planning your estate carefully will ensure protecting your hard-earned assets and distributing them in the way you wish to.
About the Author: Article by Dunbar Winston of FuneralesReforma, who is a specialist in hispanic estate planning. For more information on
, visit his site today.