Estate Planning - Basic Facts

Posted on April 3, 2008

Estate planning involves writing a will but it, itself is not a will. Estate planning can be precisely defined as a series of legal steps that involves permitting your beneficiaries to steer clear of probate and curtail the taxes incurred.

It also requires you to write a living will in which you appoint trusted acquaintances who would acquire the power of attorney and executor status should you be debilitated or die.

Following are certain basic facts about Estate planning:

• It permits you to exercise direct control over how your property will be treated when you are incapacitated.

• The most important aspects of any estate plan are the procedures followed to evade too much of the estate’s value being lost to taxes like the death tax, estate tax, etc. You can curtail the estate tax by naming the recipients of funds or property from your estate in your legal will. Also, indicate that a certain amount should be given as a gift. The lifetime tax-free gift threshold is of $1 million.

• Inclusion of a living will in the estate plan is also important. Your enduring power of attorney (EPA) can be challenged only by the court in case you fail to implement the living will as a legally binding decision.

• In case you die without writing a will, the explicit laws of your state will decide how your property will be divided following probate. In such a case, it is quite possible that your estate will be taxed the maximum probable amount. According to the law, in absence of a will, your spouse is entitled to receive one third of the value of the estate. The rest of the amount has to be distributed equally among children.

• An estate plan allows you to lay down terms and conditions regarding the distribution of your property.

• Estate planning provides protection to your assets.

• Estate planning permits very explicit instructions for how your assets should be treated in case you wish to avoid this asset division from happening.

To conclude, Estate planning is the best method by which your assets can be protected from whims of government taxation and financially irresponsible relatives. It also safeguards your property by preventing the dissolution of your property by the normal laws of succession in the country.

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