What is Estate Planning and what does it entail?
- Estate Planning is the planning of your assets during and beyond your lifetime.
- It helps you distribute your assets per your wishes.
- Estate Planning entails drafting your will and assigning a Power of Attorney.
- A trust can allow you to safeguard your assets for designated beneficiaries.
- Buying life insurance is also a critical aspect of estate planning.
Proper management of your estate is crucial through the course of your life and also beyond your lifetime. To ensure that your legacy is protected and the financial security of your chosen beneficiaries, you can rely upon Estate Planning services. To learn more about Estate Planning, read on.
What is Estate Planning?
Estate Planning is the planning of your assets during and beyond your lifetime. Your estate consists of all your tangible and non-tangible assets, determining your net worth. It includes real estate, land, cash, securities and investments, or other valuable possessions.
In India, it must draft a Will declaring your intentions to devolve your assets before passing. If you pass away without fulfilling this requirement, then country-specific laws on asset distribution will apply. In such an event, your loved ones could be left out of the inheritance process and not receive your assets.
To avoid these circumstances, you must consider the financial planning of your estate, thereby ensuring your beneficiaries are financially secure in your absence. This is called the Estate Planning process.
How to Begin Estate Planning?
Here are some things you can do to plan your estate properly
Draft a Will
A Will is a legal declaration wherein, as a testator, you lay down your plan for distributing your assets among your heirs. It is the most basic way of ensuring that your heirs are not robbed of their due inheritance.
Create a Trust
A Trust allows you to transfer your moveable and immovable property to your heirs. As a settlor, you can transfer your wealth to a trustee to hold the transferred property on behalf of your beneficiaries. The trustee ensures that the transferred property reaches the beneficiaries per your instructions.
For instance, a private Living Trust allows you to retain control of the assets placed in the trust while you are able. However, in case of your incapacitation, the benefactor carries out your instructions.
Assign a Power of Attorney
A Power of Attorney is a legal document you can sign to give another person the right to make financial decisions on your behalf. It is an important estate planning document and can help you get your financial affairs in order. Usually, a power of attorney ceases to have effect once the principal dies. However, a durable power of attorney continues to remain in effect even after the death of the principal.
Invest in Life Insurance
Long-term Estate Planning also includes investing in life insurance policies, wherein you pay premiums while purchasing the policy. Should you pass away, the policy provides death benefits to the designated beneficiaries. Buying Life insurance equals excellent financial planning that allows you to look after your loved ones beyond your lifetime.
Most people confuse Estate Planning with retirement planning. However, both types of financial planning are equally crucial. In India, beneficiaries do not have to pay an inheritance tax on the wealth they receive on your passing. The estate tax was abolished in 1985, allowing your heirs to enjoy your wealth without worrying about tax implications.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.