WHAT IS ESTATE PLANNING?
Estate planning is the process of arranging for everything you own, minus your debts, to be dealt with in accordance with your wishes upon your death. The first step is making up a Will that documents your instructions. There is a common misconception that estate planning is just for the wealthy, elderly or people with large families. Not true. Every adult should have a well-defined estate plan, no matter what the age, family status or financial worth.
TIP: Consider taking a moment to familiarise yourself with these common estate planning terms:
BENEFICIARY: A person or organization entitled to receive a benefit from the estate under the terms of your Will.
BEQUEST: The person identified in a Will to receive specific real or personal property.
CODICIL: Any legally valid document that modifies or varies a Will.
DEPENDENTS: Any person to whom the deceased was providing support or was legally obligated to provide support at the time of death.
ESTATE: The assets that the deceased owned or in which the deceased had legal rights or interests at the time of death.
EXECUTOR: The person or corporation named in a Will to administer an estate.
IN TRUST: Where assets are directed to be held for a period of time on behalf of a specified individual or charitable groups.
LEGACY: A specified cash amount identified in a Will for a named recipient.
MEMORANDUM: A non-legally binding companion document to a Will, for example, a list of personal property and their recipients.
WILL: A document containing directions for the disposition of a person’s property after their death. In many jurisdictions, marriage automatically revokes a Will.
WHY IS ESTATE PLANNING IMPORTANT?
Nobody likes to think about their mortality. As a result, people often fail to specify their wishes adequately or put the basic elements in place to protect their legacy and their surviving family. A professionally prepared plan can reduce applicable taxes and expenses of an estate, simplify and speed the transfer of your assets to the next generation and ensure your beneficiaries are protected. But perhaps more importantly, by expressing your wishes before your death, you will help to minimise the stress and emotional upset for your loved ones.
Just a few of the reasons why you need an estate plan:
It allows you to specify who will receive your assets including family or charitable organizations
It helps to minimise the transfer and death taxes on your estate where these apply
It allows you to specify how dependents are cared for
It allows you to name an executor who will see that your estate is properly administered
It improves your protection against legal challenges to your wishes by people wanting to contest your choice or beneficiaries
It makes things easier for those you leave behind, at a time when they are least able to deal with difficulty