What is Estate Planning?
Estate planning is when you put together a plan showing who would receive the assets of your estate on your death and how your estate is to be organised and administered. No one likes to think about estate planning because it means talking about death and taxation, as well as who gets what in the family. However putting an estate plan in place and giving clear directions regarding your affairs, while you are still alive, saves your spouse and other family members many problems after you have gone.
You don’t want your estate to end up paying unnecessary expense to lawyers, to the government, or to the Tax Department. This could happen if an estate plan is not in place. Also, you would want to make sure your assets go to your children, grandchildren, your spouse or others you want to benefit rather than to the wrong people.
Your other very real purpose is to save arguments and disputes within your family. Proper estate planning could be the difference between providing your heirs with a comfortable inheritance or major financial headaches.
Main Basics of Estate Planning
Most people, when they hear the term “estate”, picture someone with a big mansion and a lot of land in the country somewhere. Estate Planning has nothing to do with buying a mansion or holding a lot of assets, but it has everything to do with defining what you want to happen to your assets after your death.
Estate planning is not only about dying, because planning is a lifelong process. The impact of planning extends far beyond the span of your life as it impacts the lives of your spouse, your children and future generations within your family. It is a very personal matter. It represents a review of the estate you have created, the children you have raised, your intentions, as well as the capability of preserving your assets for your beneficiaries.
Always make sure you discuss your estate plan with your lawyer before finalising it. There is no reason why you cannot do much of the work yourself, but it is advisable to get your lawyer to review the estate plan and confirm that everything will be legally acceptable. You don’t want legal arguments or court fights between your family.
Difference between Estate Planning and Retirement Planning
Estate planning is about controlling what you own during your lifetime and then providing for your needs, should you become disabled. It is also about leaving what you have to whom you want, when you want, and in the way you want - all at the lowest cost in money and stress for your loved ones.
Retirement planning is to do with your financial goals, which are designed to accumulate assets for your needs after you retire.
Why Plan your Estate?
For most of us, providing a better lifestyle for our family and our close friends (in some cases) is the fundamental reason driving us to take the time and effort to develop an estate plan in the first place. If we did not care about our loved ones, we would not need to complete an estate plan at all.
It is a good idea to sit down with the family and talk through all you want to establish with an estate plan, so they can be in agreement with your wishes. For example, you may want your children to receive a certain amount of assistance in setting up a business. You may want your grandchildren to go through university.
You may have specific ideas on how you want your property divided. You may have a desire to allocate some money to a charity. You may need to protect your children’s and grandchildren’s future shares from any potential problems (should there be a marriage break up).
These are some of the reasons why you need to plan your estate. The more time and effort put into communicating with your spouse and your close family members, the greater the chance that your estate will be wound up correctly, (according to your wishes) with little fuss.