Essay Example on Estate Planning: Bequeathing Assets & Settling Taxes

Introduction

The preparation of tasks aimed at managing one's assets in the occurrence of their death and incapacitation is referred to as estate planning (Buie, 2019). The plan involves bequeathing of one's assets to their next of kin and heirs as well as a settlement of the estate taxes. An experienced professional attorney in matters relating to estate laws assists in setting up most of the estate plans (Fairweather, 2013). A general understanding and more explicit definition of estate planning are given as; planning of ways in which a persons' assets will be taken care of, managed, and distributed among those mentioned. Apart from death, estate planning also considers the event of incapacitation. In the event of incapacitation, it explains the management of one's properties and economic obligations. The estate plan is essential to the beneficiaries as it helps them avoid conflict in the future. This paper aims at discussing the concept of estate planning, what it is as well as the process involved in coming up with the plan.

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Process of Estate Planning

Estate planning refers to the arrangement of tasks that are used to manage a person's assets in the event of their anticipation or death. It is planning for how a person's assets will be managed, preserved, and preserved after their death. It considers the management of a person's properties and financial duties when they become anticipated (Mutual, 2019). The plan involves the settlement of estate taxes and the gift of assets to heirs. As such, the following are the most significant steps in the criteria used in estate planning.

Create an Inventory

Creating an Inventory of what an individual owes is a crucial step in estate planning. This step involves compiling a comprehensive list of a person's assets and debts. The debts information includes the account holders and their content information. Besides, it includes their names and contacts, which are essential, especially to an individual advisor. Generally, the anticipated should keep the summary of their assets and other properties in a protected and central place (Mutaul, 2019). Notably, all the documents should be accompanied by copies of original documents containing brief information/ summary for the will executor. The list can be formulated in a digital file/soft copy, and in some cases, a hand copy can be used.

Contingency Plan

The second step involves developing a contingency plan. The estate plan allows the control of a person's property and what happens to them in the time of their death or the death of spouses. It can also highlight that the family can carry on with your affairs without necessarily going through court. Besides, the contingency plan also offers a strategy for income providence in situations where an individual becomes disabled. In some cases, the plan shows how expenses distributions for caring for the disabled person among his heirs.

Children and Dependents

The third step in the estate plan involves providing for children and other dependents. The primary objective in planning is to securing the future of the loved ones, protecting and providing for them in the event of the anticipated. This step shows provision for all children. Where children are aged 18 years and below the plan shows the information of their guardians. It also considers the providence of individuals from a previous marriage; however, where they remarry, the assets do not automatically reach them (Mutual, 2019). Specifically, the third step is crucial since it addresses the situations regarding children with special needs. Formulating such a situation needs the care to avoid endangering their eligibility for state/government benefits

Protecting Assets

The key and the most significant step in estate planning involves safeguarding an individual asset for heirs and an individual's charitable legacy. The measures include minimizing the total expenses and covering estate taxes while maintaining personal objectives. The plan necessarily shows the strategies that should be adopted in transferring properties; for instance, it shows how family-owned business and investment property or stock in a business should be disposed of or distributed to the various list of people identified by the anticipated (Mutual, 2019). Some individuals use trust and permanent life insurance to enhancement the attainment of long-term objectives in safeguarding assets.

Document Wishes

Estate planning would be useless if no documents were showing individual wishes. Courts use the requests identified in a text to determine how properties will be distributed among individuals. The records show specific ways assets should be distributed by identifying various beneficiaries, for instance, beneficiaries for an individual life insurance policy, retirement accounts, and other significant assets. It also shows the naming of materials such as automobiles and other properties.

Appoint Fiduciaries

To ensure that the wishes of the anticipated are executed and honored, the anticipated must identify people who would represent them/ act on their behalf. The designated persons act as trustees, legal guardians, personal representatives, or will executor. The anticipated must be sure of their agreement with the identified fiduciaries. Also, they must inform them where to find documents containing information about their wishes. Fiduciaries can be friends, hired professionals, for instance, corporate trustees, attorneys, and bankers.

Reason for Estate Planning

An individual's assets that are usually included in their estate includes; houses, stocks, paintings, cars, life insurance, and other benefits, pensions as well as debt (Fairweather, 2013). People often plan their estates to preserve their family's wealth and secure the future of the surviving children and life partners. Other reasons include funding their children's or grandkid's education and leaving a legacy behind for charitable purposes (Fairweather, 2013). Not many people choose to leave their estate for a charitable cause.

Estate planning involves one primary step in writing a will (Fairweather, 2013). The person writing the will must be of sound mind when doing so and at no pressure from potential beneficiaries whatsoever. Other significant and essential tasks involved in the estate planning include; setting up trust accounts in the beneficiaries' names, which helps in limiting estate taxes (Fairweather, 2013). A guardian is also established for the living dependents. An executor is named to oversee the terms written in the will.

Beneficiaries are created and updated on plans like insurance and pensions. Estate planning also involves setting up funeral preparations (Fairweather, 2013). When yearly gifting is established to benefit charitable and other non-profit organizations, the amount of taxable estates reduces. A power of attorney (POA) is set up to ensure the proper direction of other assets and investments involving the beneficiaries.

Components of an Estate Plan

An estate plan ensures one's wishes and assets, and that of her family will be met in case of an illness or death (Rose, 2012). There are several elements in an estate plan, including; a will or trust- spells out how one wants to divide their property after death. It also appoints a person as a guide for minor children and guidelines for their care. A trust has the same aims of choosing a trustee to exercise the deceased wishes (Rose, 2012). The significant difference between a wish and will is that the later must go through a probate court before being implemented. A trust is often held privately and does not have to be probated (Rose, 2012). It can also be effected before the death of the owner. Most people act as their trustee and appoints another person to take over after their death.

Beneficiary forms show what is put in a will. They should always be kept to date changes in one's life, such as divorce, remarriages of beneficiaries' death require a change in the forms as soon as possible. An updated form means that one's wishes will be followed (Rose, 2012). Most forms will allow one to split an asset to more than one beneficiary or naming of a second person if the first one dies.

Durable powers of the attorney- powers of the attorney are people one names to act on your behalf in case you are unable to mention your will because of injury or illness (Burgerhart, 2018). One can appoint one attorney to handle all issues or appoint different powers of attorney who can act in various situations. It is recommendable to have more than one power of attorney in case of failure of the first choice to act due to an inability of unwillingness.

A power of attorney is capable of doing the following for the estate owner; borrowing money, conducting business transactions, dealing with property, contracting for services as well as handling legal claims (Rose, 2012). The attorney powers can also collect social security benefits for one, manage digital assets, dealing with insurance and retirement benefits, exercise stock holding rights, and performing medical and non-medical tasks.

A living will - instructions outlining the type of medical treatment one would prefer in case you become incapacitated (Burgerhart, 2018). For instance, a person who falls into a coma might specify in the document that they do not want to be subjected to a life support machine. The living will be of much help to one's family since they will avoid quarrels on the choices available for unconsciousness treatment.

Letter of intent- left to the executor to ensure they are provided with an overview of the estate owner's views for the assets and family after the death (Burgerhart, 2018). It also states essential details one would want to be relayed at the burial. This is not a legal binding agreement hence not a will nor a trust. The letter of intent can also be used to relay important information such as values and character the deceased would like to be adopted by their families.

Writing of a Will

A will is only produced and applied after the death of a person owning the estates. It is a legal document created to give instructions on how one's property, as well as custody for minors that exists, should be managed after death (Guerin & Hood, 2017). Wills usually expresses wishes in a document that names a trusted party known as trustee or executor of the will. The trustee is mandated to ensure the deceased wishes are fulfilled in the intended way, as stipulated in the will (Guerin & Hood, 2017). A will also state whether there is a trust that should be created after the owner's death. This depends on the estate owner's intentions; trust can be put into effect either in their life, living trust, or after the owner's demise known as a testamentary trust.

Probate is the legal process in which the authenticity or legality of a will is determined (Guerin & Hood, 2017). Before the assets of the deceased are administered and distributed to the beneficiaries, probate is the first step taken. After the death of the estate owner, the custodian of the will should take it to the probate court or executor within thirty days (Buie, 2019). A probate process follows and is supervised by the court to ensure the validity of the will as the last testament left by the deceased. The executor named in the will is officially appointed by the court and given the legal powers to act on behalf of the deceased.

Choosing the Right Executor

The court approves the executor appointed and named in the will. They are given the responsibility of finding and overseeing the assets left behind by the deceased (Guerin & Hood, 2017). The executor is supposed to estimate the value of the estates using the date of deaths or other valuation techniques. The probate process involves the assessing of assets such as financial assets, stocks, and bonds, real estate property...