Estate planning is to prepare for the management of an individual’s asset in case they are dead or become incapacitated. It determines the ways in which the assets will be preserved, managed, and distributed and it suggests the management of someone’s financial obligations and properties. Here assets cover a range of objects, including someone’s cares, houses, stocks, life insurance, pensions, debt, and even artwork.
Estate planning is essential and necessary for every one of us since it helps preserve wealth and leave the legacy to participants’ spouse and kids and encourages charitable donation. If someone wish to make estate planning, they should do that with an attorney who are familiar with estate law.
Major steps of estate planning
There are some major steps of estate planning.
- Writing a will
Writing a will is to write a legal document to express participant’s wishes about how their property will be given to their heirs and to declare whether a trust should be created after their death. The will is only authentic after a probate. During this process, the court will give legal power to the executor chosen by participant officially to oversee the terms of the will.
- Setting up trust accounts in the names of beneficiaries to limit estate taxes
- Establishing a guardian
- Choosing an executor to supervise the terms of the will
The chosen executor will act on behalf of participants. They should estimate the value of participant’s assets, pay off their taxes and debt, and file their last tax returns. After this, the executor will go to the court for authorization over the distribution of the left estate.
- Creating beneficiaries on their life insurance, IRAs, or 401(k) plans
- Making funeral arrangements
- Making donations to qualified charitable organizations and NGOs to reduce taxes
Donating to charitable organizations and NGOs while participants are still alive will minimize their estate tax liability. They can work with their estate planners to greatly reduce their taxable income and use this strategy to make full use of their donations.
- Setting up a durable power of attorney for their other investments