Many people have the idea that estate planning is only for the rich. A poor and a middle-class family always neglect to have an estate plan. They have the idea that their net worth is not enough to consider an estate plan. This is not true, every individual should have an estate plan to secure their family’s life after they die.
Estate planning is a process of framing a plan to handle and manage an individual’s estate after his/her death or incapacitation. In case of death, the estate of the decedent’s is distributed among the heirs. In the case of incapacitation, the disabled person gives permission to the family members or an attorney to complete the things he/she has intended to do.
Estate planning should have a proper structure to avoid any problems in future. An improper estate plan may lead to an unintended distribution of assets by the court. A proper estate plan ensures smooth execution of the probate process according to the wishes of the decedent.
Estate planning requires some tools in the process. Some of these tools are:
A will/trust is an important component of estate planning. A will is a legal document that specifies how the decedent intends to distribute his/her assets among the heirs. Individuals prefer to make a trust to limit the estate taxes. These documents are not only for the rich, a poor and a middle-class family can also make a will/trust.
A will/trust should be written in a proper manner so that it will not create any confusion while execution. The testator should clearly mention his/her intentions regarding the assets he/she owns. For example, if the testator is naming two beneficiaries for one asset then it may create conflicts and lead to a will contest in the court.
An individual should always include a will/trust in his/her estate plan. This will restrict the court from doing unintended distribution of assets after the death of the estate planner.
2. Power of Attorney in Estate Planning
Drafting a power of attorney is very important. If an individual become incapacitated, then the mentioned person in the power of attorney can act on behalf of that individual. He/she will manage every financial and legal task of the incapacitated person. This will restrict the interference of the court to handle the assets of the incapacitated person.
In a will, the executor has this type of authority. The executor is responsible for administering the assets of the testator after he/she dies. The executor executes the probate process through the court.The executor is responsible for clearing out the dues of the decedent and distributing the remaining money to the heirs.
In most of the families the power of attorney is granted to the spouse. However, in some cases friends or other relatives gets the authority
3. Beneficiary in Estate Planning
If the estate planner intends to distribute his/her assets to a person who is not an heir, then he/she needs to name the person as a beneficiary for some of the assets. In case there is no beneficiary then then all the assets get transferred to the heir.
If in some cases there is no heir and the beneficiary is not named then the funds are transferred according to the court. The court is unaware of the intends of the deceased. This can lead to an unintended distribution of the deceased’s assets.
The beneficiary should be over the age of 21. He/she should also be mentally competent. Further, in case of non-fulfillment of this conditions the court may interfere into the matter.
4. Healthcare Power of Attorney
A healthcare power of attorney gives a person the authority to take health related decisions for an individual. An individual grants this authority to those persons whom he/she can trust. The person with this authority is responsible for saving a life.
Also, the person with this authority should have similar views and a common point of view with the individual giving him/her this responsibility. So that all the decisions taken by the authorised person would match the thought process of the individual.
So, a productive estate planning depends upon these tools. With them it is impossible to frame an estate plan. Every estate planner should take maximum advantage from these tools for ensuring success in the future. A proper estate planning is the key to happiness in the family.