Its Never Too Early to Start Estate Planning
It does not matter that your “pot of gold” is not a substantial one. It is prudent that every person plans his or her estate carefully. Planning your estate well will ensure that your assets are enjoyed by the people you intend to receive those assets whilst taking care that your liabilities do not become a burden to them. Having your wealth and assets in the wrong hands should be the last thing on your wish list.
Before you decide which is the plan best suited for you, you will need to know what options are available for one to choose from as different individuals have different needs and objectives. Once you have a general understanding of the options, planning your estate will then be an easier task. One should make an inventory of all your assets and liabilities such as properties, shares, insurance claims, investments, bank accounts, and debts before starting your estate planning. One should also make a list of your beneficiaries as well as the chosen executor of your estate.
WRITING A WILL
A will be being one of the most commonly used tools of estate planning. A will is a legal document that declares how one would like to deal with his/her estate after death. The governing rule of the will is section 5 of the Wills Act 1959. The maker of the will should be of sound mind and must be of the minimum age of 18. You will need an executor(s) in your will to distribute your estate according to the will. A guardian(s) can also be named in the will to take care of the welfare of your children who are under the age of 21.
Basically, you can have anyone you like to be the beneficiary(is) in the will. If the beneficiary is considered to be too young to receive a gift, that gift can be held on trust (testamentary trust) by a trustee, who will then pass on the gift to the intended beneficiary upon the fulfilment of conditions stated in the will. It is also vital to note that when a will is rewritten, it will revoke the will last made.
There are several disadvantages to will writing. Most people are not aware that a lawyer will have to be appointed to apply for probate upon the death of the testator. This process may be protracted and may cause difficulty to your family. Further, the validity of your will or your capacity when preparing a will can be subject to court proceedings which can cause much delay and distress.
CREATING A TRUST
Creating a trust is a useful estate-planning tool because it affords you flexible lifetime arrangements. Unlike a will, a trust takes effect upon the signing of the trust deed. It allows you to distribute your estate in the ways you wish to whether you are alive or deceased, this is known as a living trust. A testamentary trust, on the other hand, arises upon the death of the testator.
To illustrate how a living trust works, we can use the family house as an example. When a living trust is created and the house is recorded as one of the assets in the trust, the trustee(s) named in your trust will now be the legal title holder of the property and can hold the property in trust for his or her beneficiaries. The trustee named in the trust does not necessarily have to be a person. An organization such as a trust company can also be the trustee.
A trust is a legal arrangement which says the property is no longer yours but of the trustee who is now the legal owner. The disposition of the trust assets can occur during the lifetime of the settlor (trust maker) provided that the terms of the trust are fulfilled. The trust can be revocable (amended, altered or revoked) or irrevocable.
ESTABLISHING POWER OF ATTORNEY
In addition, a person can also manage his estate through power of attorney. Under a power of attorney, a designated person(s) (donee) can be named by you (donor) to have authority over your finances and property and to act on your behalf in the event that you are incapacitated or unable to be present yourself.
INSURED IN LIFE INSURANCE
Unlike the above, a life insurance does not allow you to manage your assets. Instead, the insurance company will pay you as the insured, a predetermined sum of money upon your death. However, the beneficiaries named in your policy may not be able to have an immediate claim to the sum. The insurance company may take up to 2 years to determine the cause of death before allowing the beneficiaries to claim their inheritance.
Notwithstanding that, life insurance still acts as a protection for your loved ones in the case of your demise and that your dependants would now have a sum of money. There are many types of life insurance with different types of premiums, terms and conditions available in the market. You will need to choose wisely based on your financial capabilities before signing up for one.
NOW, IT’S TIME TO TAKE ACTION
After reading the foregoing, it is now time for you to take action and start your very own estate planning. There are various considerations to be taken into account in estate planning such as the best way for the property to be transferred or the manner in which it is to be used or managed, amongst others.
A lot of people are now looking into readily available estate planning options as a means not only to preserve their assets but also to build a legacy for the coming generation. You may need to consult an estate planning professional or lawyer to advise you on the legal implications pertaining to estate planning and also to make adjustments in your plans as the years go by.