Key Takeaways
- An estate plan determines how an individual’s savings and assets get distributed after their passing.
- Most people ignore this topic because dying is seen as a distant eventuality and hold the erroneous notion that estate planning is for the wealthy.
- Estate planning enables you to distribute your assets – irrespective of your net worth – to your loved ones in accordance to your preference, ensure that your young kids are protected and that family disputes are prevented.
We are covering a topic that’s still considered taboo, but it is a necessary one to be addressed. We put in a lot of hard work to earn money, grow it and accumulate assets. We also focus on using these resources to upgrade our lifestyle and fulfil our dreams. But do we spare a thought to what happens to our hard earned money and assets after we are gone? What happens to our loved ones? Often, by nature, people avoid thinking, and as a result, planning for such eventualities.
While it is understandably not a circumstance any of us would like to think about, making sure we protect our loved ones with the appropriate amount of life insurance cover and proper estate planning is critical. In this blog post, we delve into the latter and discuss why estate planning is important for everyone, not just the wealthy.
What is estate planning?
An estate plan makes provisions for bequest i.e. how an individual’s savings and assets get distributed after their passing. Not only does it ensure that your loved ones get what you leave behind, it also allows you to allocate resources for the causes that you care about, even after your demise.
The process starts with determining your net worth by listing out all your assets and liabilities. You then need to determine how your assets will be managed and who will carry out your estate plan – typically done by your lawyer or trusty of choice. Finally, you need to make the all important decision of who gets what.
Why is it often ignored by most people?
Estate planning is often ignored by most people because they are focused on the things that happen while they are still alive and what happens after they are not around is often not on their priority list. This may partially be because in the society we live in, it is considered a taboo topic that is not discussed openly. People also hold the erroneous notion that you need to be a high net worth individual or have a lot of assets to distribute in order to justify estate planning.
Why estate planning is critical for one and all
People are slowly beginning to recognise that estate planning is not about the amount of assets one has but the need to adequately plan for the aftermath of one’s passing. In simple terms, it is important for one and all, and not just the wealthy. Say your assets are a modest stock portfolio and a residential property, it is still important to specify who gets what percentage of each asset for a number of reasons. Some of the key benefits include:
- Protecting your loved ones: Estate planning ensures that all your assets are documented and that you can assign them between the different beneficiaries as per your preference. This can be as simple and straightforward as drafting a will. Without this, your loved ones might have to spend years in court proceedings and large sums of money on legal fees to receive what they are due to receive, putting families – especially those with young kids or old parents – in a financially strenuous situation.
- Protecting young children: In the unfortunate circumstance that someone with young kids passes away, the courts might have to decide who acts as the children’s guardian which might not be as per your preference and may worsen the ordeal for the children. Proper estate planning empowers you to appoint the right guardian for your kids and provide guidelines as to how they should be cared for, so you can have peace of mind that they will always be looked after.
- Preventing family disputes: In the case where multiple beneficiaries may be involved, such as more than one kid or sibling, the situation can potentially get ugly. One beneficiary might feel they deserve a larger share of the assets or that they should be in-charge of the finances, leading to potential conflicts. Estate planning enables you to prevent these situations, allowing you to decide who gets what and who is incharge.
Bottom Line
It is important that we as a society and as individuals prepare adequately for what happens in the aftermath of our passing to shield our loved ones as much as is in our control. Estate planning can make a huge difference to those that you leave behind and care about dearly in these unfortunate eventualities. It ensures your beneficiaries are aware of all your assets and understand how to manage them and mitigates the potential of any disputes and conflicts.
Invest a short amount of your time to take care of your family by taking this simple yet critical step.