Estate planning is a common term. This term is used to describe the preparation of activities that helps to safeguard one’s assets in the event of a life-threatening sickness or death. The preparation include the selection of beneficiaries including the payment of estate taxes.
Setting up an estate plan is somewhat difficult and can be complicated at times. Therefore, it is advisable that you contact an estate planning attorney for the task. An estate planning attorney has all the experience and expertise to set up an error-free estate plan, including one that conforms to the law of your state.
The way an estate plan is drafted out in a state is quite different from the way an estate plan is drafted out in other states. For instance, estate planning NJ is quite different from estate planning NY.
What you need to know about estate planning
Estates planning as earlier stated, involves the planning of how a person’s assets would be managed, kept, and disbursed after his or her death. An estate plan also involves how an individual properties would be managed, including financial obligations in case such an individual suffers from an illness that renders him or her incapacitated.
There are several assets that could amount to an individual’s estate and they are: houses, cars, stocks, paintings, life insurance, pensions, including debts. People choose to plan an estate for several reasons, and these reasons ranges from keeping family wealth, providing for offspring’s, etc.
There are some steps that are to be taken in drafting out an estate plan, and one of the simplest steps involves writing a will. Other primary step are listed below.
Steps involved in estate planning
- Restricting estate taxes by creating trust accounts using the name of beneficiaries
- Providing an estate executor to monitor the terms of the will
- Setting up a potent power of attorney (POA) to take care of other assets including investments
- Organizing funeral arrangement
- Developing / updating beneficiaries on certain plans regarding life insurance, IRAs and 401 (K) s.
- Establishing yearly gifting to certain charitable and non-profit institutions to lessen the taxable estate
Drafting out a Will
We all should be conversant with what a will is. A will is simply a legal document that provide clear instructions regarding how an individual assets should be managed upon death or incapacitation. The will contains all the intents of the individual including the names of trustees who would see that all that is written in the will is adhered to.
The will would likewise state if a trustee should be created upon death. Depending on what the estate owner wants, the trust can be effective when they are alive (living trust) or after their demise (Testamentary trust).
Just as all originals have a fake, there are also fake wills out there. To determine the genuineness of a will, a process regarded as probate is carried out. Probate is known as the prime step that is taken in the administration of the estate of a dead individual and sharing his or her assets to the designated beneficiaries. Within 30 days after the dead of the testator, whoever is in custody of the will must take it to the probate court or to the executor stated in the will.
The probate process is done to test the authenticity of the will. This procedure which is assisted by the court aims to prove the validity of the will left behind by the deceased. The executor stated in the will be officially appointed by the court. This individual after appointment has the right to act on behalf of or speak for the deceased.
Preparing for estate taxes
A few things can lessen the value of an estate. Things such as federal and / or state taxes placed on an estate can drastically reduce its value even before assets are shared to designated beneficiaries. The demise of a breadwinner can lead to large liabilities for the family, thus, this calls for the adoption of techniques that can help lessen, terminate, or put off the payment of tax.
When preparing an estate plan, there are certain important procedures that individuals and married can adopt to lessen the effects of these taxes. One of the tactics used in reducing the effects of these taxes is the setting up of an AB trust. A married couple, for example, can set up this trust which separates into two upon the demise of the first spouse.
