WHAT IS ESTATE PLANNING?
Aug 7, 2013
An Estate Plan is a set of instructions to carry out the owner’s intentions for distribution of his or her wealth. The idea of transferring one’s wealth after death is a long American tradition, and a well-established legal right. One of the basic purposes of law in America has been to protect wealth. In a sense, the idea of a pursuit of wealth, the freedom to pursue one’s dreams, was among the Founder’s ideals.
An important advantage of an Estate Plan is greater certainty. Any property owned at the time of death can be subject to claims. Creditors including claims for medical expenses during the last illness can reach it. The Estate Plan can use trusts and other legal structures to reduce or eliminate potential claims. The Plan will also avoid probate for many assets and reduce risks of loss
Favorable tax treatment is another important advantage of an Estate Plan. Taxes will reduce the amount of the estate available for distribution. There are many options through an Estate Plan to reduce or avoid taxation. Planning is an effective way to avoid unnecessary or excessive tax payments.
The more important individual decision is to make a plan- to take control of the decisions concerning one’s wealth and property. Wills and trusts are among the important tools. A will is a well-known type of estate planning document; one prepares a written record of choices and intentions. The will can be a clear statement of the persons and organizations to receive parts of the estate. The will authorizes certain persons to carry out its terms.
Trusts are agreements to give assets to certain beneficiaries named in the document. The benefits of trusts include reduction in taxes and protection of assets against certain claims. The assets will pass directly to the beneficiaries upon the owner’s death. A trust can be revocable- that is to say- changeable during the life of the owner. An Estate Plan can include a will and as many trusts as the owner may wish to create.
Organizing files and records is part of making the Estate Plan. The effort of establishing an orderly process can bring focus, clarity and precision to the overall circumstances. It is continuation of caring for family, loved ones, friends, and important causes.
Today, laws and public policies can change in fundamental ways. Life insurance is an example. It is generally not part of one’s estate. It is a contract that pays named beneficiary and it is not subject to other legal processes such as probate. It is interesting to note, that life insurance has taken on a new role in recent years. In a growing trend, viatical settlement companies purchase life insurance policies and pay cash or structured payments to the owners. In recent months, Texas and a few states have established laws that permit use of life insurance settlements for medical care and allow this process without loss of eligibility for Medicaid. The point is that laws and policies change and the results of changes can affect the quality of our lives in important ways. Professional assistance in the field of estate planning is more than a luxury. Professional Estate Planning is a necessary part of understanding the choices and options that may be available.