Estate planning is one of the important activities of financial planning. The process of financial planning is not complete without this step but still In India Estate planning is not taken seriously. Many think that only those who are affluent should do estate planning. But this is not true. Everyone who is earning and creating wealth and assets should have a succession plan through estate planning.
One more myth about this is that only once you are in your later years of life you should think of estate planning. This is not correct. One has to have a proper plan for distributing his/her wealth , assets or even liabilities from the younger age itself.
Estate planning is the process of arranging for the management and disposal of a person's assets during their life and after their death. It typically involves creating legal documents, such as a will or trust, that outline how the person's assets will be managed and distributed upon their death. The goal of estate planning is to ensure that a person's assets are distributed according to their wishes, while minimising taxes and other expenses.
Estate planning can include creating a will or trust, designating beneficiaries for financial accounts and insurance policies, and creating powers of attorney to allow someone else to manage a person's affairs if they become incapacitated.
It also involves consideration of factors such as potential long-term care expenses, charitable giving, and guardianship arrangements for minor children. It also involves tax planning, which can help to minimise the amount of taxes that will be due on a person's estate after their death.
Estate planning is not just for the wealthy, it's important for everyone, regardless of their net worth, to have an estate plan in place to ensure that their assets are distributed according to their wishes and to minimise the burden on their loved ones in the event of their passing. It's also important to review and update your estate plan periodically as your life and circumstances change. Estate planning is important for several reasons:
It ensures that your assets are distributed according to your wishes
Estate planning allows you to specify how you want your assets to be distributed after your death. This can provide peace of mind, knowing that your assets will be distributed according to your wishes, rather than being decided by a court.
It helps to minimise taxes and other expenses
Estate planning can also help to minimise taxes and other expenses associated with the distribution of your assets. For example, creating a trust can help to reduce the amount of estate taxes that will be due on your assets.
It helps to protect your assets
Estate planning can also help to protect your assets from creditors, lawsuits, and other potential claimants. For example, creating a trust can help to protect assets from creditors, while creating a limited liability company can help to protect assets from lawsuits.
It helps to ensure that your loved ones are provided for
Estate planning can also help to ensure that your loved ones are provided for in the event of your death. For example, creating a will can help to ensure that your minor children are cared for by the guardians of your choosing and creating a power of attorney can help to ensure that someone is able to manage your affairs if you become incapacitated.
It can also include arrangements for long-term care and incapacity
Estate planning can also include arrangements for long-term care and incapacity, such as a living will or advance healthcare directive, which can help to ensure that your end-of-life care is carried out according to your wishes.
In summary, estate planning is important because it allows you to have control over the distribution of your assets after your death, minimise taxes and other expenses, protect your assets, ensure that your loved ones are provided for and make arrangements for long term care and incapacity.
Preeti Zende is a SEBI registered Investment Adviser and Fee only financial Planner. She is Founder and owner of Apana Dhan Financial Services, Associate of Insurance Institute of India.