Key Takeaways
- In simple terms, your estate plan defines who receives what and when, after you step out of the picture.
- In the absence of an estate plan, the relevant succession act will be enforced, which will be time-consuming and the outcome may not be as per your wishes.
- A clear and elaborate estate plan leaves no room for ambiguity over who gets what and hence any disputes over inheritance can be avoided.
- Setting up a trust for your children’s future is the best way to ensure that these funds are out of bounds for any creditors.
- Last but not the least, an estate plan is the key to creating generational wealth.
Covid-19 has suddenly made us aware of our own mortality. Although we have always known that nothing is certain except death (and taxes, if we quote Benjamin Franklin), we are often reluctant to think about it and understandably so. However, it’s important that we don’t let the unpleasantness of the thought prevent us from putting the necessary measures in place to protect our loved ones, should this eventuality come to pass. Afterall, we spend our lives caring for our loved ones, so wouldn’t we want to ensure that they are taken care of even if we are not around? That’s exactly why estate planning is required.
In today’s post we’ll be exploring the benefits of estate planning in much more detail. But before that, let’s get the basics out of the way.
Basics of Estate Planning
Estate plan is the plan according to which your estate – which is the money and assets you’ve accumulated over the years – will be distributed to your beneficiaries after you pass on. Your beneficiaries will comprise the people or organisations you care about. In simple terms, your estate plan defines who receives what and when.
One of the common myths is that only the wealthy have enough possessions to do estate planning. Actually, almost all of us have an estate and all of us should be aware of what constitutes our estate. All of our financial assets (e.g. bank balance, insurance, investments), tangible personal assets (e.g. car, artwork, jewellery), immovable property (e.g. house, land, farms) and intellectual property (e.g. royalties) form part of our estate.
Besides, if at all one feels that they don’t have enough wealth, it is all the more important that all they have is immediately accessible to their family in any unfortunate event. And that will only happen if they have done the necessary planning.
Benefits of Estate Planning for Generations
Ease of asset distribution as per you wish
Having a well thought-out estate plan ensures that your assets are distributed amongst your beneficiaries in the fastest and easiest way possible. In the absence of a detailed estate plan, your family will have to wait for the relevant succession act (which may be based on the deceased’s religion or Indian Succession Act 1925) to be enforced which will be time-consuming and the outcome may not be as per your wishes.
Resolution Of Family Disputes
A clear and elaborate estate plan leaves no room for ambiguity over who gets what and hence any disputes over inheritance can be avoided. Your will must include in great detail the proportion in which all your assets are to be divided amongst various beneficiaries. Not only will it ensure a peaceful distribution of assets amongst your family, it also protects the assets from any future claims from unwanted parties.
Protection From Creditors
One of the most important purposes of estate planning is to secure the future of your children. And that includes not just leaving behind sufficient funds for them, but also protecting those funds from your creditors, should there be any outstanding liabilities. Setting up a trust for your children’s future is the best way to ensure that these funds are out of bounds for any creditors. As a bonus, trust funds also help to minimise taxes, which we will address in a separate article. Be sure to appoint a trustee that has the best interests of your family at heart.
Creation of generational wealth
Last but not the least, an estate plan is the key to creating generational wealth. For efficient transfer of wealth, one must use appropriate instruments such as buying life insurance to pay off outstanding debt, setting up a trust to protect one’s families’ interests, and writing a will to detail the distribution of assets. All of these put together will not only enhance the inheritance amount, but will also help to protect your wealth from getting lost in disputes or going into the hands of untrustworthy parties. Overall, you can be assured that your future generations will end up better off.
Bottom Line
Estate planning enables a smooth settlement of financial matters for your grieving family. Most importantly, it ensures peace of mind for yourself knowing that you have protected the interests of your loved ones. Looking at it in this perspective may help to overcome the gloominess of the topic and spur you to start thinking. No one knows what the future holds, so we must take the preemptive steps for the repercussions of any curveball life may throw at us. And to ensure that we are taking appropriate measures, we must gain knowledge, make informed decisions and seek help from professionals where needed. So, stay tuned to learn more about estate planning and how we can help you with it!