Estate planning is the act of preparing for the transfer of a persons wealth and assets after his or her death. Assets, life insurance, pensions, real estate, cars, personal belongings, and debts are all part of one’s estate. Estate plans must be
written, signed, and notarized by the person who owns the estate. In other words, Estate planning is simply the process people engage in to determine the disposition of their assets, either at death or incapacity. Estate planning includes planning for incapacity as well as a process of reducing or eliminating uncertainties over the administration of a probate and maximizing the value of the estate by reducing taxes and other expenses.
It’s true that anybody can benefit from estate planning. It has nothing to do with how much wealth you have and everything to do with how you would like your affairs managed once you pass away. Whether you want to leave an inheritance or would like to direct how your debts will be paid—all of this can be thoroughly outlined by proper estate planning. Of course, the best way to manage these things will come down to your preferences as well as what is included in your estate (whether it is property, money, homes, etc.)
Estate planning is for everybody, not just the wealthy. Without an
appropriate estate plan, friends, and relatives can spend a lifetime (and their
life savings) battling over your assets. It can be intimidating, but it is a necessary step in ensuring your assets end up where you want them, without the interference of the IRS or third parties.
Establishing a trust is a great way to mitigate some or all of the estate taxes that
would otherwise be owed upon your death. A trust allows a person to transfer legal title of his or her property to another person while they are still alive,
potentially saving thousands in taxes.
A trust also gives the trustee (the person acting on behalf of the decedent) the
authority to distribute assets immediately to the beneficiaries based on the terms of the trust. No court is involved, so there are no probate fees and no public record of the value of the estate. Many financial advisors urge clients to have trusts, especially those who live in states where probate fees are especially high or if the client owns a home or real estate. Trusts are not for everyone, however, so it is important to seek proper financial advice.