What is Estate Planning? What is its definition?
When you are young and single, questions like “what is estate planning?” don’t really occur to you. As you get older and have a family, you start to wonder about the details of that question. Essentially the answer is as simple as making sure your loved ones are taken care of to the best of your ability when you are gone. That sounds simple enough, but there are a lot of details to cover in those two words.
Cover Funeral Expenses
To avoid any issues with funds coming out of your estate, just pay your funeral expenses ahead of time. This will also help your family avoid arguing over who is going to cover what and how it should be done. You can set it up the way you want it. Then no one has anything to argue about and you won’t have to worry about your estate being involved.
Plan for Taxes
The taxes on an estate can be difficult to navigate and may cause your family stress. When the will is read they will hear one amount and receive another. You really need to go to a financial advisor who specializes in estate planning so you can learn the details of the taxes that may apply to your various accounts and investments. There are far too many types of taxes to list. An inheritance tax may apply even after the taxes on the funds are taken out. If you want to leave your family worry free, you’ll make sure there are funds to take care of this. You can also choose tax free investments that will seriously limit any tax obligations.
Put Someone in Charge
Death and money are two things that are sure to bring out the worst in people. Sometimes the people you think you can trust the most to manage your affairs are the very people who suddenly become greedy or power hungry when it comes to money and managing your estate. Instead of putting a family member in charge, you may be better off to hire someone to manage the estate. An impartial party who does not benefit from the funds in your estate will be more likely to manage them without bias. They will also be bound by legal issues that prevent them from dipping into your estate.
You can also put a system of checks and balances in place. For example, you might create trusts that can only be accessed under certain circumstances under a judge’s order. You might even choose to have funds dispersed over time instead of in one lump sum.
Answering the question of “what is estate planning” is far more complicated than you might realize. The more assets you have, the more planning there is to be done. If you take care of this when you are young, you can just add to it or change it as you get older. Otherwise you may find yourself overwhelmed at the details of planning your estate so that your loved ones are taken care of.